Consumer boom shows signs of faltering

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The Independent Online

Britons have started to rein in their spending and borrowing plans, according to a raft of figures published yesterday.

High street spending came close to stagnation last month, mortgage lending fell sharply and the number of first-time homebuyers hit an all-time low. One in four mortgages went to first-timers, almost half the level of the peak four years ago, the Council of Mortgage Lenders said. This was the lowest since its records began in 1992.

The drop in first-time buyers was disclosed in the CML's monthly mortgage figures, which showed that lending dropped last month.

Banks lent a total £11.8bn to homebuyers, down by 9 per cent from October's £12.9bn, the CML said. Remortgaging also fell at a similar rate. They are the first figures since the Bank of England raised interest rates in November for the first time in almost four years.

Michael Coogan, CML's director general, said: "After an exceptionally strong October, lending fell back a little in November partly due to seasonal factors. Looking ahead to next year, we expect house price inflation to reduce, but the market looks set to remain active despite higher interest rates. 2004 will bring other challenges - not least the conundrum of how to address the affordability problems faced by first-time buyers."

The figures will support forecasts of a housing slowdown as demand dries up on the bottom rungs of the property ladder. Simon Rubinsohn, the chief economist at Gerrard fund managers, said first time buyers had been "squeezed hard" by soaring house prices.

"It does warrant a degree of caution about the outlook for property price inflation over the coming year at a time when a new mood of bullishness is apparent in most market forecasts," he said.

Nationwide building society said it expected homeowners to enjoy another year of inflation-busting house price growth next year. It said the price of the average home would rise 9 per cent, with London growing 6 per cent and the Northern regions surging 12 per cent.