Mortgage approvals close to five-year low, according to Bank of England

Figures from the Bank of England have shown that mortgage approvals in October fell to their lowest level in almost five years.

Overall, lending to individuals dropped to its weakest increase since November 2002, at £9.07 billion, down sharply from the £11.66 billion increase recorded in the same month last year.

The number of mortgages approved was lower for the fifth consecutive month at 83,000 in October. This was down 5,000 from last month and has led experts to predict even slower mortgage lending ahead.

In May 2004 mortgage approvals hit a high of 123,000 but have since dropped each month.

Net mortgage lending grew 0.9 per cent, its slowest rate since November 2001, to £7.52 billion in October. Last year mortgage lending was almost £10 billion in October.

Since November 2003 the Bank of England has increased the cost of borrowing five times to 4.75 per cent. This is widely seen as responsible for deflating the house price bubble.

With major players like Barclays and Deutsche Bank predicting house price falls of between eight and 15 per cent in 2005, the number of mortgages taken out has slowed.