Six-year low for mortgages

THE number of people taking mortgages to buy homes dropped to its lowest level for six years in January, giving a strong signal that the UK property boom is over.

Just 31,579 mortgages were taken out for new purchases during the month, a 43% fall on the previous year and down from 40,201 in December.

The British Bankers' Association said it was the lowest level since January 1999 and represented the lowest share of overall approvals - loans agreed but not yet made - since the series began in September 1997.

Only remortgages sustained the lending market during the month, with a total of 126,316 loans approved, a 28% year-on-year drop.

Experts predict the housing market will continue to be subdued for the first half of the year and will leave the Bank of England in a difficult position over the future of interest rates.

Consumer spending continues to remain strong, but the Bank appears to have achieved its aim of cooling the property market with five rate rises since November 2003.

BBA director of statistics David Dooks said: 'After the series disruption in November and December following changes in regulation, mortgage lending resumed its relatively subdued trend in January and this set to continue in the near term as approvals of loans for house purchase and equity withdrawal were very weak, even for a January.'

The BBA said the average approval price fell back to £116,200 from £118,000 the previous month.

Howard Archer, chief UK economist at Global Insight said the statistics were good news for existing homeowners as rate rises were hitting purchase figures, not property prices.

He said: 'The latest data suggests that house prices are proving to be resilient and softening relatively slowly, indicating that the pressure on the sector coming from higher interest rates and stretched affordability rates is manifesting itself more in fewer transactions than in sharply falling prices.'

Growth in consumer lending strengthened during January, reflecting the demand for credit to pay off Christmas debts. New lending on personal loans and overdrafts was well up on December's figures at £2.8bn, but credit card borrowing fell slightly.