British mortgage approvals fell for the 12th consecutive month to hit a series low in July, the Bank of England said today, pointing to further sharp falls in house prices in the coming months.
The BoE said approvals - an indicator of future movements in house prices - fell to 33,000 in July from 35,000 in June, below market forecasts for a reading of 35,000.
Approvals are at their lowest since the series began in April 1993 and around a third of what they were last year as banks toughen up lending criteria in response to the credit crunch.
"It's at painfully low level so we are still facing the prospect of falling prices for at least another year," said Alan Clarke, an economist at BNP Paribas.
Sterling fell to its lowest against the dollar since April 2006 after the weaker than expected figures - and a report showing the manufacturing sector shrinking for a fourth straight month - added to expectations interest rates could fall by the end of the year.
Policymakers, however, are expected to hold borrowing costs at 5 per cent on Thursday because inflation is running at more than twice the official 2 per cent target and is expected to spike higher.
"While we now expect the Bank of England to cut interest rates before the end of 2008, we believe that it will not move before November when there is likely to be growing evidence that the deepening economic slowdown and rising unemployment are diluting underlying inflationary pressures," said Howard Archer, an economist at Global Insight.
The BoE said mortgage lending rose by £3.2 billion in July, slightly stronger than expected but a roughly of a third of the increase seen in the same month last year.
It was up 6.9 per cent on the year, the weakest rate since June 1999.
Total net lending also rose 6.9 per cent on the year, its weakest since January 1997.
Consumer credit rose by £1.09 billion in July, above forecasts for an increase of £800 million.
Reuters