Mortgage approvals plummeted to a new low of 36,000 in June, new figures from the Bank of England have shown.
Approvals fell 5,000 in the last month alone, and are down almost 70% compared to a year ago.
The B of E data echoes the findings of a British Bankers' Association (BBA) report, released last week. It stated that approvals for house purchases had fallen by almost a quarter in a single month, and were at their lowest level since the BBA started collecting mortgage data 11 years ago.
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Downward pressure on prices
The dramatic decline is the result of high mortgage cost and low availability, as well as the fact that many prospective buyers are waiting to see how low house prices will fall.
And while there are signs that things may be improving slightly in the short term, with two major mortgage lenders having recently reduced their rates, the indications are that the mortgage market could remain constrained for two to three years.
This will have significant consequences for homeowners, with research showing that a lack of mortgages has already helped push house prices down by as much as 10% from the peak.
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Not smooth sailing for buyers, either
News of falling house prices will no doubt be welcomed by any first time buyers looking to make that first step onto the property ladder.
Unfortunately, they are the group most likely to be affected by the lack of mortgages.
This is because jittery lenders favour offering what funds they do have to lower risk customers, and are charging extremely high premiums for those seeking to borrow more than 75% of the value of a house.
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Increase your odds
If you are desperate to take advantage of the falling house prices, there are a couple of things you can do to boost your chances of getting a competitive mortgage.
The first, and most obvious, one is to scrape together as big a deposit as you possibly can. This is easier said than done but as we mentioned before, mortgage lenders view customers with small deposits as high risk, and will either penalise you with high rates or reject you outright. So scrimp and save everything you can, borrow from the Bank of Mum & Dad, or do whatever you must to piece together a sizeable lump sum.
Another good idea is to visit a mortgage broker (read more about this here). Not only will they help you decipher all the legal and financial jargon, but brokers also have access to deals that aren’t offered to the public direct. Best of all, they're free, so you've got nothing to lose.
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