Mortgage approvals fell to an 18 month low last month according to the Bank of England as the UK housing market continues to suffer.
In June 44,192 new loans were approved, down from 50,544 in May and 10.3% lower than the same period in 2011.
The poor figures were attributed to the extended Jubilee bank holiday, although the biggest factor is likely to be the end of the first time buyer stamp duty holiday in March.
House purchases in January hit a 25 month high of 58,183, indicating that high numbers of bought homes earlier in the year to save up to £2,500.
Re-mortgage approvals also fell to 24,117, the lowest level for over 2 years.
Commenting on the figures, Howard Archer, chief UK economist at IHS Global Insight, said: “Significantly, mortgage approvals are very low compared to long-term norms. June’s level of 44,192 is only 51.1% of the average monthly level of 86,537 seen since 1993, while a level of 70,000-80,000 has in the past been considered consistent with stable house prices.
Many lenders have also reduced their lending targets due to a lack of desire to lend. In recent days Santander reduced its lending targets and recently announced plans to pull back even further.
However, mutuals are appearing willing to fill this gap, with figures from the Building Societies Group showing a 38% increase in lending during the first six months of 2012.
Commenting on this trend,Brian Murphy, head of lending at Mortgage Advice Bureau, said :“Mortgage lending by mutuals has been the driving force behind much of the growth in 2012. We’ve been undertaking significant levels of business with the mutual market this year as they remain committed to lending and have some of the most competitive rates in the market.
“MAB’s National Mortgage Index found application levels have fluctuated in the first half of the year, but while they are still 6.9% higher than at the same point in 2011 gross mortgage lending by mutuals is 38% higher, which is testament to their competitive pricing and innovative products.”