Home loan approvals slump to six-year low in January

The number of mortgage approvals for househunters plummeted to its lowest level for six years last month, the UK's major banks said yesterday.

The number of mortgage approvals for househunters plummeted to its lowest level for six years last month, the UK's major banks said yesterday.

In a fresh sign of a slowdown in the property market, the British Bankers' Association said approvals - loans agreed but not yet made - fell 43 per cent compared with the previous January.

The 31,285 loans for house purchase, which were down from December's 40,201, were the lowest number since January 1999.

David Dooks, the BBA's director of statistics, said mortgage lending in January was "relatively subdued". "This looks set to continue in the near term as approvals of loans for house purchase and equity withdrawal were very weak, even for a January," he said.

Mortgage approvals are seen as a good pointer towards house price figures that come out a couple of months later. The more closely watched official Bank of England figures for lending in January are published on Monday.

Alan Castle, the UK economist at Lehman Brothers, said: "All in all, we will be watching data on consumer and households sectors very closely in the coming months."

But Howard Archer, the chief UK economist at the consultants Global Insight, said recent house price data for January and so far in February had showed the market was "resilient".

"The pressure on the sector coming from higher interest rates and stretched affordability is - for now at least - manifesting itself more in fewer transactions than in sharply falling prices," he said.

Figures from the Land Registry showed the number of property transactions had fallen by 24 per cent in the final quarter of last year.

The BBA also published figures showing that gross mortgage lending was £11.6bn in January, 18 per cent lower than in December and January of last year. Net mortgage lending - excluding repayments - rose by £4.2bn against an increase of £5.2bn in December and an average of £4.5bn during the past six months.

However, unsecured lending - bank loans, overdrafts, credit cards and hire purchase deals - rose £1.1bn in January.

The BBA said the £700m rise in loans and overdrafts was well above the current monthly average of £500m, while credit card borrowing - at £400m - was a little stronger than both December and the previous six months' average.