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New mortgages approved for house purchase rose to 33,000 in September, a 1,000 increase on the historic low of just 32,000 achieved in August, according to figures released by the Bank of England today.

The marginal increase, the first month-on-month rise since June 2007, still leaves the number at record low levels and over two thirds down from the levels being achieved just a year ago. Figures for remortgages, also released today, showed a small improvement with the number up on August.

Whilst net mortgage lending rose £2.167 billion in September, the August number was revised down and showed a fall of £691 million in August – in other words mortgagors paid off more than they borrowed.

The contraction of mortgage credit in August continues to confirm that a Secular Bear in both Homeownership and real House Prices is under way, despite the efforts by money-pumping Central Banks to inflate away the problem by expanding the money supply. Broad money grew by 12.4% in the year to September, up from 11.5% in August, the fastest rate since January.

Eyes on Next Week

Hopes for a minimum 50 basis point cut by the Monetary Policy Committee at next week’s two-day meeting have already been reflected in currencies and the action of stockmarkets, the latter appearing to have started their counter-trend rally amidst the current bear market.

There are hopes that with interbank lending finally easing, the decline in rates between banks continued today with the 3-month dollar rate shedding another 5bp to 3.42%, any cut of the base rate by the MPC will be reflected in the rates paid by borrowers . . . be those borrowers mortgagors or other banks.

It is also likely that politicians, having used taxpayers money to nationalise banks, will look to apply pressure in the run up to Christmas. Even as recession engulfs the entire economy, and RPI-adjusted GDP continues to contract at the fastest rate for over 30 years, it would not be inconceivable for the banks new masters to urge them to advance credit in a hope to get the overindebted consumer indebting again so that retail sales look good in the New Year and tax revenues can be bolstered.

Allsop Residential have announced a special two-day auction of repossessed residential property, to take place place on the 12th and 13th November at the Cafe Royal and the Cumberland Hotel respectively.

The auction will feature 400 lots to be offered on behalf of a variety of mortgagees over the two days.

This auction is in addition to their previously scheduled two-day residential property auctions. The first, on October 30th and November 3rd, has some 500 repossessed properties listed. What is expected to be their final auction of the year, to be held in London on 15th and 17th December, is also expected to include a large number of repossessions.

This auction emphasises the rapid acceleration in the numbers of repossessed properties ending up at auction which has been taking place in recent months. According to Stephen Rose, Debt Advice Bureau director and founder of in:specie™, “Continued tightness in interbank lending and expectations of further sizable falls in property prices in 2009, particularly as the recession bites, mean cash-strapped mortgagees are looking to get what they can as fast as they can”.

Which means as long as the banks need the cash, the flow of repossessed properties to auction should continue. However, should interbank lending free up then, once the balance sheets of the lenders begin to improve, the need to sell fast will disappear. When that happens, it would be reasonable to expect lenders to be more selective about what repossessed properties they sell through auction.

Earlier today the Danish Central Bank raised the key interest rate by 50 basis points to 5.50%. In a statement the bank said: “As a result of continued intervention to support the Danish krone, Denmark’s Nationalbank increases the lending rate and the rate of interest for certificates and deposits from 5 percent to 5.5 percent”. The move [...]

The range of different mortgages available through high street lenders has plummeted to just 3,281, a three-quarters drop from the July 2007 peak of 13,000, according to Moneyfacts.co.uk.

Analysis of house price data from Nationwide Building Society shows that RPI-adjusted prices also peaked in July 2007, though the peak in nominal prices was October 2007.

The two are not disconnected.

The absence of bank-to-bank lending, the inability to securitise mortgages and the spike in interbank interest rates has both reduced mortgage choice by 75pc and resulted in numerous lenders withdrawing from the marketplace, some even going bankrupt. Those lenders left standing are only willing to lend to people with good credit and a big deposit.

Without cheap and easy credit chasing high-risk borrowers, property prices could do only one thing … Collapse. Figures from both Nationwide and Halifax show a year-on-year decline of more than 12pc. Meanwhile, the Bank of England reports that new house purchase mortgages plunged to a historic low of just 32,000 in August.

Whilst both credit and criteria remain tight the housing market has little hope of recovering. In fact, stabilisation is the best that can be hoped for and a U-shaped recession would now be considered a lucky escape compared to the L-shaped depression which is threatening to make an entrance.

This means, for those with cash or impeccable credit, cheap properties will continue to be available for the foreseeable future and, if you can find them, there are plenty of bargains still to be had.