Home loans drop to a five-year low

FEARS over the slowing housing market mounted today following news that mortgage demand has slumped to its lowest in nearly five years.

The Bank of England said the number of mortgage approvals - loans agreed but not yet made - fell for the fifth month running to 83,000 in October, the lowest since January 2000.

Economist Malcolm Barr at JP Morgan pointed out that in the weakest 12 months of the early-1990s housing downturn, approvals averaged 73,000 per month. 'The Bank data are approaching that level quite rapidly,' he said.

Mortgage lending eased to £7.5bn, the lowest since March 2003. Consumer credit - borrowing via credit cards, personal loans and overdrafts - fell to £1.5bn, the lowest since April.

The approvals figures support the view that the housing market is slowing sharply, but the jury is still out on whether prices will collapse or stagnate.

Meanwhile, worries that predictions of a housing crash are undermining consumer confidence were soothed by news of increasing optimism.

The GfK Martin Hamblin consumer confidence index registered minus four in November against minus six in October.