The number of mortgage approvals for the UK’s six largest banks have dropped to a 16-month low since April 2009, as the UK housing market weakened.
Mortgage loan approvals slumped to 45,000 last month from 47,000 in the previous month, according to the Bank of England (BOE). Home loan value also plunged to £5.9 billion (S$12.2 billion) from £6.1 billion.
The recovery in the UK housing market earlier this year has halted, as more banks restrict borrowings and a glut of housing supply curb price inflation.
“It will be some time’ before banks are in a position to finance an economic recovery,” said Mervyn King, governor of the central bank.
“Mortgage approvals for house purchase decreased slightly in August,” said the central bank in a statement. “The major UK lenders reported that demand for secured credit continued to be subdued.”
Asking price of properties in England and Wales dropped 1.1 percent this month from a month ago amid an oversupply of residential units for sale and a “mortgage famine”, according to Rightmove Plc.
Property values have fell 3.4 percent in the last three months, wiping out 50 percent of the gains made in the first half of this year.
The BOE set the benchmark interest rate at 0.5 percent in September and bond-purchase programme held at £200 billion, as authorities assessed that signs of economic recovery is weakening.