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Mortgage approvals decline and Building Society borrowers face no further rate reductions as Nationwide sets example
Mortgage approvals for house purchases fell in November to their lowest since records began a decade ago, data showed today, putting further pressure on policymakers to get banks lending again.
Mortgage approvals -- a leading indicator of housing demand -- fell to 27,000 in November from a downwardly revised 31,000 in October. That was well below forecasts and the lowest level since the series began in January 1999.
Mortgage lending rose by £740 million in November, but was still less than a tenth of its rate a year ago when the housing market was just starting to come off the boil.
Growth in consumer credit was broadly steady at £751 million in November.
"There just doesn't seem to be any floor at the moment to any of the housing market data," said Matthew Sharratt, UK economist at Bank of America.
"House price indicators will continue to tumble in coming months."
Meanwhile Building Societies, who are struggling with the dilemma of whether to favour savers or borrowers are coming down on the side of savers, keeping an incentive to save and to keep funds invested with them.
This inevitably means that their lending rates will not follow The Bank of England Base rate down, as witnessed today by Nationwide, Britain's second- biggest mortgage lender, which said it will not pass on any further Bank of England rate cuts to customers holding tracker loans, defying government pressure on lenders to match Bank rate reductions.
Nationwide, owned by its borrowers and savers, said it planned to invoke a clause in its tracker loan contracts to avoid passing on any further cuts in the Bank base rate below its current level of 2%.
"Clearly we need to balance the needs of our borrowers and savers, so if the base rate goes below 2% in the future, we will enforce the floor at that level," a Nationwide spokesman said today.
Most of Nationwide's tracker loans incorporate a "collar" allowing it to ignore base rate cuts below 2.75%, but the lender waived this when the central bank cut its benchmark rate by 1 percentage point to just 2% last month.
Tracker loans carry a repayment rate that rises and falls in line with the base rate.
The Bank's rate-setting monetary policy committee is widely expected to cut the base rate again in an effort to bolster the flagging economy when it holds its next monthly meeting on January 8.
The government has repeatedly urged the country's lenders to help improve credit availability by passing on in full any rate cuts by the central bank.
The government's intervention comes as most lenders are attempting to shrink their loan books in an effort to bolster their capital strength, heavily depleted last year by the credit crunch and subsequent banking crisis.
About 200,000 of Nationwide's 1.4 million mortgage customers hold tracker loans, the group's spokesman said.
Further bad news came from the CIPS/Market PMI survey, also published today, which showed Britain's manufacturing sector contracted for the eighth month running in December and at the fastest rate since the survey began 17 years ago.
Today's data will likely reinforce expectations that the Bank of England will cut interest rates by at least 50 basis points next week from the current 2%. The central bank has already slashed borrowing costs by 3% since October.
A global shortage of capital has forced many banks to clamp down on lending since the credit squeeze began more than a year ago, squeezing the lifeblood out of the property market and pushing house prices down around 15% from their 2007 peak.
Indeed, a separate survey on credit conditions published by the Bank of England showed banks had tightened up on lending to households in the fourth quarter and expected to further reduce credit lines in the coming months.
Spreads on corporate lending widened in Q4 and were expected to increase further going forward, the survey showed.
"If we do see any more rate cuts from the Bank of England, we will probably see them (banks) trying to widen margins," said Stephen Lewis, chief economist at Insinger de Beaufort.
"Even so, I think there will probably be a cut of about 50 basis points this month."
Bank data also M4 measure of money supply showed an annual increase of 16.4% in November, the highest since June 1990, as institutions liquidated their assets.
Mortgage approvals -- a leading indicator of housing demand -- fell to 27,000 in November from a downwardly revised 31,000 in October. That was well below forecasts and the lowest level since the series began in January 1999.
Mortgage lending rose by £740 million in November, but was still less than a tenth of its rate a year ago when the housing market was just starting to come off the boil.
Growth in consumer credit was broadly steady at £751 million in November.
"There just doesn't seem to be any floor at the moment to any of the housing market data," said Matthew Sharratt, UK economist at Bank of America.
"House price indicators will continue to tumble in coming months."
Meanwhile Building Societies, who are struggling with the dilemma of whether to favour savers or borrowers are coming down on the side of savers, keeping an incentive to save and to keep funds invested with them.
This inevitably means that their lending rates will not follow The Bank of England Base rate down, as witnessed today by Nationwide, Britain's second- biggest mortgage lender, which said it will not pass on any further Bank of England rate cuts to customers holding tracker loans, defying government pressure on lenders to match Bank rate reductions.
Nationwide, owned by its borrowers and savers, said it planned to invoke a clause in its tracker loan contracts to avoid passing on any further cuts in the Bank base rate below its current level of 2%.
"Clearly we need to balance the needs of our borrowers and savers, so if the base rate goes below 2% in the future, we will enforce the floor at that level," a Nationwide spokesman said today.
Most of Nationwide's tracker loans incorporate a "collar" allowing it to ignore base rate cuts below 2.75%, but the lender waived this when the central bank cut its benchmark rate by 1 percentage point to just 2% last month.
Tracker loans carry a repayment rate that rises and falls in line with the base rate.
The Bank's rate-setting monetary policy committee is widely expected to cut the base rate again in an effort to bolster the flagging economy when it holds its next monthly meeting on January 8.
The government has repeatedly urged the country's lenders to help improve credit availability by passing on in full any rate cuts by the central bank.
The government's intervention comes as most lenders are attempting to shrink their loan books in an effort to bolster their capital strength, heavily depleted last year by the credit crunch and subsequent banking crisis.
About 200,000 of Nationwide's 1.4 million mortgage customers hold tracker loans, the group's spokesman said.
Further bad news came from the CIPS/Market PMI survey, also published today, which showed Britain's manufacturing sector contracted for the eighth month running in December and at the fastest rate since the survey began 17 years ago.
Today's data will likely reinforce expectations that the Bank of England will cut interest rates by at least 50 basis points next week from the current 2%. The central bank has already slashed borrowing costs by 3% since October.
A global shortage of capital has forced many banks to clamp down on lending since the credit squeeze began more than a year ago, squeezing the lifeblood out of the property market and pushing house prices down around 15% from their 2007 peak.
Indeed, a separate survey on credit conditions published by the Bank of England showed banks had tightened up on lending to households in the fourth quarter and expected to further reduce credit lines in the coming months.
Spreads on corporate lending widened in Q4 and were expected to increase further going forward, the survey showed.
"If we do see any more rate cuts from the Bank of England, we will probably see them (banks) trying to widen margins," said Stephen Lewis, chief economist at Insinger de Beaufort.
"Even so, I think there will probably be a cut of about 50 basis points this month."
Bank data also M4 measure of money supply showed an annual increase of 16.4% in November, the highest since June 1990, as institutions liquidated their assets.
Fri, 2nd Jan 2009