Mortgage approvals are down, but it's not deterring the big banks, who are snapping up as much as much business as possible right now…

Whilst the banks are taking market share from traditional building societies, the overall number of mortgages approved for house purchases dropped sharply last month to the lowest level since records began back in 1993, new figures have shown. 

The Bank of England (BoE) said 42,000 mortgages were approved for purchases during the month, down from 58,000 in April and 63,000 in March. This is the thirteenth month running that approval rates have fallen and the figure for May is 64% below that for the same period in 2007.

Remortgaging, which has been making up the bulk of lending, was also down over the month, with the number of of you switching mortgages down 10% on April's figure.

A total of 90,000 remortgages worth £12.1 billion were approved in May, accounting for almost 60% of the £18.5billion of mortgages approved overall.

Looking to remortgage? Speak to an impartial adviser who can help.

Philip Shaw, chief economist at Investec was succinct about the figures saying they were:

"Terrible. There is no other way of describing them. It is really symptomatic of what is going on the housing market. The real danger is there is a knock-on effect to consumer activity."

Just £5.8 billion was advanced to those of us wishing to buy houses last month; this compares to 16.9 billion a year ago.

However, the interesting thing that has emerged is that the main high street banks have increased their share of the new mortgages despite lending us less money!

Their market share has grown from 56% in October 2007 to 77% in May 2008.  Two years ago, during the market boom, the new mortgage market was fairer when banks had about half of the market.

David Kuo, Head of Personal Finance at impartial website Fool.co.uk, says:

“The increasing dominance of banks in the market for new mortgages is a worry for anyone looking to step onto the housing ladder.

“The once level playing field that borrowers could count on for competitive rates has been tilted in favour of banks. Even worse, banks are offering unattractive deals knowing that customers are faced with little option but to accept them. 

“Fool.co.uk urges banks to treat customers fairly at this difficult time. The pendulum of power has swung in their direction, but they need to remember that a pendulum swings both ways. If they exploit their privileged position now, then they need to be ready to duck for cover when the pendulum swings back the other way.”

So, as banks expand into the mortgage market, are they playing fair when they provide our mortgages, especially when we are left with little choice?

Even if you don’t think they are, what can we do about it?

Let us know your comments.

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