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By Joe Parkinson
Of DOW JONES NEWSWIRES
LONDON, Jul 23, 2008 (Dow Jones Commodities News Select via Comtex) --
U.K. mortgage approvals slumped to a fresh series low in June, while net lending also dropped sharply as the credit crunch continues to weaken housing market activity, data from the British Bankers' Association showed Wednesday.
Approvals for house purchases fell to 21,118 in June from a downwardly revised 27,449 in May, the lowest number since records began in 1997, the trade association said.
That is 67% less than in June 2007 and way below the average of GBP5.0 billion for the past six months.
The data also showed net mortgage lending tumbled to its weakest level since December 2001, dropping to GBP3.8 billion from GBP4.5 billion in May.
Gross mortgage lending dropped to GBP15.1 billion in June from GBP15.9 billion in May, 23% weaker on the year.
"Another record low number of mortgages approved by the banks for house purchases means that the whole market is likely to be at its least active since the early 1990s," said David Dooks, BBA statistics director.
"The pressure on household finances is being reflected in subdued consumer borrowing, with spending on cards lower than of late and borrowing on personal loans and overdrafts being comparatively weak," he said.
The data showed the number of loans approved for re-mortgaging nudged down to 59,637 from 62,637 in May, below the average of the previous six months of 68,637, but still 9% higher than in June 2007.
The BBA also reported that consumer credit grew GBP0.3 billion in June compared with a rise of GBP0.4 billion in May. In addition, new spending on credit cards grew GBP7.3 billion, but was lower than in May, reflecting the lowest number of purchases since July, the BBA said.
The U.K. housing market began to cool in the latter half of last year after the Bank of England raised interest rates five times between August 2006 and July 2007 and the global credit crisis hit the mortgage market.
Even though the BOE has cut its main interest rate 75 basis points to 5.0% since December, lenders haven't reduced their mortgage rates in tandem due to the credit crisis.
Most housing market indicators in recent months have shown that the reduction in housing loans has led to stagnation in the market and weighed on prices.
Although the market has found some support from high employment and an imbalance between supply and demand for homes, higher fuel and food costs have squeezed disposable incomes.
Web site: www.bba.org.uk
-By Joe Parkinson, Dow Jones Newswires, +44 207 842 9291; email@example.com
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