The number of properties sold in August fell to the lowest level since 1959 as potential buyers adopt a 'wait and see' attitude and mortgage providers rein in lending amid a precarious economic climate.
According to HM Revenue & Customs, only 62,000 houses were sold last month, compared to more than 140,000 in the same month last year, amounting to a drop of more 60 per cent in just one year.
At the same time, statistics from the British Bankers' Association (BBA) have revealed that just 21,086 mortgages
were approved for house purchases, down from 58,564 in August last year. The number of people looking to remortgage
also fell by 28 per cent, down to 47,765.
BBA statistics director David Dooks commented: "The low number of mortgage approvals in previous months predicted lower gross lending in August, and together with remortgaging, a much weaker net lending figure than of late resulted."
"Falling property prices, economic pressures on households, tighter lending criteria and anticipation of the government's announcement on stamp duty all suppressed or delayed demand in August and will continue having an impact in the months ahead."
The Government's belated decision about the stamp duty break for properties worth less £175,000 has so far failed to make an impact, as Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (RICS
), pointed out:
"The subsequent decision by the Government to widen the zero band on stamp duty, albeit only temporarily, alongside the introduction of more competitive mortgage products by lenders should have helped bolster interest in the housing market this month, but these developments are likely to have been overshadowed by concerns stemming from the turmoil in financial markets.
He added: "The renewed focus on risk has lifted the cost of wholesale money, which may well feed back into higher mortgage rates."
Meanwhile, house prices are falling at their fastest rate for 25 years. The Council of Mortgage Lenders (CML), which had originally predicted a fall of seven per cent in the average house price this year, said that because of the uncertain market conditions greater clarity was needed to make further predictions.
"Our May prediction of a 7 per cent correction now looks wide of the mark, but trying to update that is now futile," said Bernard Clarke of the CML. Along with most players in the mortgage market, the CML does not expect prices to recover until 2010 at the earliest.
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