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New research shows that the number of new home loans approved by banks last month was 44% lower than last year are likely to bring calls for another interest rate cut early in 2008.
The main high-street banks lent just under £4bn on mortgages in November, £500m less than in October, and down sharply on the £6bn lent in September, as higher borrowing costs and the fallout from the credit crunch hits the housing market.
Earlier this month the Bank of England's monetary policy committee cut rates, for the first time in two years to 5.5%, and many commentators believe that further cuts in the bank rate are coming.
November's weak data provides yet further evidence that housing market activity is now slowing in the face of stretched affordability, as well as the tightening lending practices resulting from the credit crunch. The slowing market should keep up pressure for another interest rate cut sooner rather than later.
Global Insight predicted yesterday that house prices would fall 4% in 2008 alone, having previously expected them not to change. It sees a growing danger that the housing market could see a sharp correction.
Meanwhile, The Bank of England said mortgage equity withdrawal was up on the second quarter at £11bn but well below 2006's £14bn peak.
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