The number of mortgages approved for people buying a home dived by 17% during January as the housing market suffered a steep fall in activity, figures showed today.
A total of 48,198 loans were in the pipeline for house purchase during the month, the lowest level since May 2009 and the second consecutive monthly drop, according to the Bank of England.
There was also a fall in total mortgage advances, with gross lending sliding to £10.24 billion, down from £13.53 billion in December.
But unsecured lending was surprisingly strong during the month, with people borrowing £500 million through credit cards, loans and overdrafts, once repayments were taken into account, the highest level since November 2008.
The rise was nearly double the £265 million increase seen in December, and comes after consumers had repaid more than they borrowed during five of the previous six months.
However, it was still well down on the levels seen during the peak of the credit boom, when consumers regularly increased their outstanding debt by more than £2 billion a month.
The figures on the housing market are in line with previously reported data, which showed activity fell sharply during January due to a combination of the freezing weather and the end of the Government's stamp duty holiday.
The British Bankers' Association also said mortgage approvals for house purchase fell to an eight-month low, while the Royal Institution of Chartered Surveyors reported a fall in activity among both potential buyers and sellers.
Nationwide said last week that the drop-off in activity during January had led to a 1% slide in prices during February - the first fall for 10 months.
It now remains to be seen whether the slide in activity was caused by one-off factors, or whether it shows that the housing market recovery has run out of steam.
Jonathan Loynes, chief European economist at Capital Economics, said: "While bad weather may have played some part, this obviously adds to concerns over the sustainability of the upturn in the housing market."
Howard Archer, chief UK and European economist at IHS Global Insight. said: "The marked relapse in mortgage activity in January reported by the Bank of England reinforces our suspicion that house prices are likely to be prone to falls in 2010 and they will be essentially only flat over the year."
The number of loans approved for people remortgaging continued to fall during January to 23,611, as low interest rates meant homeowners had little incentive to switch to a better deal.
There was also a fall in the level of mortgages agreed for people releasing equity or borrowing against a buy-to-let property at 23,035.
But net lending, which strips out redemptions and repayments, held up better at £1.53 billion, well up on the previous six- month average of around £1 billion.
Building societies continued to see their share of the mortgage market fall during January, with net lending contracting for the 13th month in a row.
Consumers repaid £819 million more mortgage debt than was advanced to new borrowers during the month, the biggest net repayment since February 2009.
People also continued to withdraw their savings from mutuals, with the value of deposits held by the sector dropping by £755 million in January, according to the Building Societies Association.
The group said January was always a "challenging" month for savings, as people withdrew money to repay debt they had accumulated over Christmas.
But it added that building societies would continue to find it difficult to attract savers while the base rate remained low and the market was distorted by the part-nationalised banks.
However, it welcomed the announcement that Northern Rock's 100% savings guarantee would be removed on May 24.Reuse content