The property slump is getting worse according to industry figures Mortgage lending for house purchase by the UK's main banks has fallen to its lowest level on record. The British Bankers Association (BBA) said that in May, the number of new mortgage approvals to home buyers fell to just 28,000. That was a 20% fall in just one month and 56% down from May last year. The BBA said the number of new approvals was the lowest since its records started in 1997 and warned that the market would stay subdued. "Measures of mortgage activity were lower in May as a result of tighter lending criteria and economic pressures on households," said David Dooks of the BBA. "Only remortgaging business is holding up, where people need or want to take advantage of deals with other lenders," he added. BBA members account for about two-thirds of total UK mortgage lending. Contraction The UK property market is going through a rapid and unprecedented slump in activity and sales. The supply of mortgage funds, much of which comes from lenders in the international financial markets, has largely been turned off because of the continuing credit crunch which started nearly a year ago. Many participants in the property market, such as house builders, individual mortgage lenders, estate agents and surveyors, have been telling the same story, with widespread predictions that sales will fall by between 35% and 45% in the course of 2008. The knock-on effect has been that house prices have been falling for the past few months, with many experts now expecting a fall of more than 10% by the end of the year. Mortgage approvals are widely seen as a good indicator of sales in the next few months. The figures from the BBA suggest the most dramatic contraction in lending so far. However, its data does not include building societies. Figures from all lenders will be published by the Bank of England on 30 June. 'Deep correction' Howard Archer, chief UK and European economist at Global Insight, said: "More housing market data, more very worrying news that heighten concern that we are in for an extended, deep correction in the housing market. "The BBA data graphically highlight that housing market activity is currently being throttled by stretched affordability and tight lending conditions. "Very low housing market activity seems certain to feed through to further depress already markedly weakening house prices."



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