Weak mortgage lending set to undermine house prices

Fresh evidence that Britain's housing market recovery is faltering, in the form of a sharp fall in mortgage lending, could damage consumer confidence, economists warned yesterday.

The Bank of England said that net mortgage lending – the value of home loans advanced minus repayments made on existing mortgages – was just £318m in March, 83 per cent down on February and at the lowest level since last July when the figure was actually negative. The Bank said there had been a small increase in the number of mortgage loans made in March, but that the total, 48,901, was only 4 per cent up on February's figure, itself a nine-month low.

Housing analysts said there were some technical explanations for the data. The snowy weather seen in January set back the housing market, for example, while the election has caused uncertainty. Also, the Government's stamp duty holiday, which expired at the end of last year, saw many buyers rush through transactions to save tax.

Nevertheless, there have been growing signs in recent months that house price increases are now slowing.

Howard Archer, chief UK economist at Global Insight, said: "Muted Bank of England mortgage approvals data for March reinforce our suspicion that house prices will be erratic over the coming months and may well be no better than flat over the rest of the year, particularly if more properties come on to the market, thereby pushing the supply and demand balance more towards buyers."