Loan approvals fall .hurriyet2008-detailbox-newslink { font-family: Arial, Helvetica, sans-serif; font-size:13px; font-weight:bold; text-decoration:none; color:#000000;} .hurriyet2008-detailbox-newslink:hover { font-family: Arial, Helvetica, sans-serif; font-size:13px; font-weight:bold; text-decoration:underline; color:#990000;} LONDON - United States-born mortgage crisis continues to take its toll on United Kingdom’s real estate market, as mortgage approvals in the country decline to 27,000 in November from 31,000 in October, according to a report by the Bank of England.

U.K. mortgage approvals dropped to the lowest since at least 1999 in November and banks predict they will restrict lending further to companies and consumers as the recession causes spiraling defaults and losses.

Lenders granted 27,000 loans for house purchase, down from 31,000 in October, the Bank of England said Friday in London. Economists forecast 32,000, according to the median of 18 predictions in a Bloomberg News survey. Banks said in a separate survey that they plan more curbs on all lending.

Prime Minister Gordon Brown said last week he's planning new measures to bolster the economy as it succumbs to the first recession since 1991. Economists predict that the U.K. central bank will cut the benchmark interest rate to the lowest ever next week to help thaw the freeze in lending.

Lending curbs
"Housing market activity has ground to a virtual halt," said Alan Clarke, an economist at BNP Paribas SA in London. "Given that the lending channels are blocked, it's right that the Bank of England is cutting by more than it normally would.''

The U.K. currency dropped by a quarter against the euro last year as the economy deteriorated and investors added to bets on lower interest rates. Brown said Dec. 22 he's "angry" with banking executives for their role in the financial meltdown. He and Chancellor Alistair Darling orchestrated a 50 billion-pound ($73 billion) rescue of the banking system and took majority stakes in Royal Bank of Scotland Group Plc and mortgage lender HBOS Plc.

That hasn't stopped banks from rationing credit, requiring bigger down payments on home loans and refusing to pass on the Bank of England's interest-rate reductions to the current 2 percent in full. The average cost of a two-year fixed-rate mortgage fell by less than half the unprecedented 1.5 percentage- point interest-rate reduction in November.

Demand for credit from consumers and companies fell in the fourth quarter and defaults and losses increased, banks told the Bank of England. They anticipated delinquencies will rise further in the survey conducted between Nov. 24 and Dec. 15. "The housing drop has been compressed because of the famine of mortgage finance," said Brian Hilliard, director of economic research at Societe Generale SA in London. ``Rate cuts will help, but we also need to see banks increasing the volume of lending.''

Net lending secured on dwellings was 0.7 billion pounds in November, compared with 0.5 billion pounds the previous month, the Bank of England said. Gross mortgage lending slipped to 15.5 billion pounds, the least since 2001.

The housing slump is deepening, with Hometrack Ltd., Rightmove Plc and the Royal Institution of Chartered Surveyors all predicting a further 10 percent drop in home values this year. House prices fell an annual 12.2 percent in November, the most in at least 12 years, the Land Registry said Dec. 30.

Economic growth contracted 0.6 percent in the third quarter and consumer spending dropped the most since 1995. Unemployment rose at the fastest pace since 1991 in November.

Consumers, with record debts of 1.5 trillion pounds, didn't step up borrowing in November, Friday's report showed. Consumer credit rose a net 751 million pounds, little changed from October.

The U.K. central bank will probably cut the benchmark interest rate by half a point to 1.5 percent on Jan. 8, according to the median forecast of 45 economists in a Bloomberg News survey. The key rate, now at 2 percent, has declined by 3.75 percentage points in the past year.