Fall in number of mortgage approvals

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The Independent Online

The number of mortgages approved for house purchase fell for the third month in a row during February as the housing market continued to show signs of slowing down, figures revealed today.

A total of 47,094 loans were approved for people buying a home during the month, 21% down on the recent peak reached in November last year, according to the Bank of England.

Commentators have attributed the fall in activity during the early part of this year to a combination of the bad weather in January and February and the end of the Government's stamp duty holiday, which caused people buying lower value properties to rush through purchases.

But it remains to be seen if the current slowdown is a temporary one due to these one-off factors, or if it marks the start of a new trend in the property market.

Net mortgage lending, which strips out redemptions and repayments, rose slightly during February to £1.59 billion, the highest figure since December 2008.

But it still remained well down on levels of more than £9 billion a month regularly seen during 2007.

Vicky Redwood, senior UK economist at Capital Economics, said: "February's household borrowing figures provide further evidence that the housing market recovery may be starting to run out of steam."

Nationwide and Halifax both reported house price falls of 1% and 1.5% respectively during February, which they attributed to the fall in activity seen during the early part of the year.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "Bank of England data showing mortgage approvals sinking to a nine-month low in February add to the evidence that the housing market has endured a difficult, slow start to 2010.

"While the Government's decision in last week's Budget to bring in a stamp duty holiday for first-time buyers of all properties up to £250,000 will provide some support to housing market activity, we suspect that it will remain relatively muted through 2010."

But there was a stronger pick-up in the amount of unsecured debt consumers took on during February, with this increasing by £528 million, the highest figure for 15 months.

Within the total, credit card debt rose by £374 million, a level last seen in November 2008, while borrowing through loans and overdrafts also reached a 15-month high of £154 million.

The Building Societies Association also released figures today showing that savings balances held by the sector had risen for the first time in 12 months.

People paid in £623 million more to building societies during February than they took out, ending 11 consecutive months of net withdrawals.

Adrian Coles, director-general of the BSA, said: "It is encouraging to see the mutual sector attract a net inflow of retail deposits in February, ending a run of 11 monthly net withdrawals.

"However, attracting funds in the retail market remains challenging, although we look forward to more normalised market conditions with the removal of the 100% deposit guarantee of Northern Rock.

"It's too early to tell whether the inflow that mutuals received from savers this month is a one-off or if it represents a reversal of the recent trend of outflows."

But mortgage lending by building societies contracted for the 14th month in a row, with borrowers repaying £830 million more than was advanced in new loans during the month.

However, there were signs that the situation may improve, with mortgage approvals by the sector rising to their highest level since October last year of £1.39 billion.

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