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Dip in number of mortgage approvals

The number of mortgages approved for people buying a home dipped during December as the housing market suffered its traditional seasonal slowdown, figures showed today.

A total of 59,023, loans were approved for house purchase during the month, down from 60,045 in November, but still nearly double the level seen in December 2008, according to the Bank of England.

There was also a fall in new mortgage lending, but borrowing through unsecured credit rose for the first time in six months.

The decline in the number of mortgage approvals for house purchase follows 12 consecutive months during which the figure increased, and economists said the fall suggested the rapid rise in housing market activity, seen as prices recovered, may now be beginning to slow.

Net lending, which strips out redemptions and repayments, also slowed to £1.17 billion during December, down from £1.56 billion in November, although it remained above the previous six-month average.

But there was a slight pick-up in the number of people remortgaging, with mortgage approvals for people switching to another deal rising to 27,276, up from 25,619.

Andrew Goodwin, senior economic adviser to the Ernst & Young Item Club, said: "The small fall in mortgage approvals (for house purchase) is consistent with the idea that the mini house price boom is running out of steam.

"It is clear that underlying demand remains relatively subdued and, with pressures from low supply likely to fade, we expect prices to flatline through this year."

Property intelligence group Hometrack also released figures today showing that house prices in England and Wales edged ahead by just 0.1 per cent during January, with the cost of property remaining static across much of the country.

The group also reported a fall in both the number of new buyers and the number of sellers coming to the market in England and Wales during the month, and a drop in the level of sales agreed.

But while mortgage lending was down, the amount people borrowed through credit cards, overdrafts and loans increased for the first time since June during December, the Bank of England figures showed.

Total unsecured borrowing was slightly lower during the month than in November, but weaker repayments led to outstanding debt rising by £52 million.

However, economists cautioned against reading too much into the rise, saying some of it was likely to have been caused by consumers bringing forward purchases before VAT increased back to 17.5 per cent in January.

Within the total, the amount people owed on credit cards rose by £195 million. Borrowing through overdrafts and loans contracted for the seventh consecutive month, but at £143 million, net repayments were well down on those of £623 million and £713 million seen during November and October respectively.