Four-year low for mortgages

MORTGAGE lending in August rose at its slowest pace in a year while the number of new loans for house purchase fell to its lowest in nearly four years, official figures show.

The figures from the Bank of England, along with a report from the Confederation of British Industry revealing a slump in High Street spending, buoyed hopes that interest rates may have peaked.

The Bank said that lending secured on homes rose by £8.39bn in August compared with an increase of £8.74bn in July. That was the weakest rise since August last year.

The number of new mortgage approvals - regarded by economists as an important gauge of future housing market demand - fell for the third straight month to 96,000 in August from 100,000 in July. That has not been lower since November 2000.

The figures, which confirm the picture painted by recent surveys from the British Bankers' Association and the Council of Mortgage Lenders, provide further evidence that the housing market may now have turned.

Meanwhile the CBI showed retail sales plunged this month in the weakest performance for a year-and-a-half. It added that retailers expect a further drop next month in the gloomiest prediction for nine years.

Also, a report from GfK Martin Hamblin showed British consumer confidence fell to its lowest in one and a half years in September.

The raft of data reinforced hopes that interest rates are close to their peak. The UK base rate has been raised from a low of 3.5% last November to 4.75% today.

'Today's clutch of figures will provide further comfort for the authorities that it's strategy for cooling the economy is working,' said Simon Rubinsohn, chief economist at broker Gerrard. 'No change in policy is a certainty for October and there must be a real doubt that interest rates will be raised at the November meeting, as is currently widely expected in the market.'

However, the Bank's figures also revealed that, mortgage lending aside, the UK's credit boom marches on. Consumer credit increased by £1.9bn or 1% in August. The rise was £100m stronger than the increase in July. Credit card lending in August grew to £901m from £828m in July, taking total debt to nearly £12.4bn.

Total new lending, which includes both lending secured on homes and consumer credit amounted to £10.25bn, the lowest rise since December 2003.

Total outstanding household debt, however, still remains above the £1 trillion-mark for the third month running.

Useful links