Mortgage lending dives 17% as housing market cools further

Mortgage lending plunged 17 per cent last month, according to figures from the major banks that provide further evidence of a cooling housing market. The amount of money lent for house purchases dipped to £3.89bn in July, from £4.68bn in June, and the lowest level for seven months, the British Bankers' Association said.

Mortgage lending plunged 17 per cent last month, according to figures from the major banks that provide further evidence of a cooling housing market. The amount of money lent for house purchases dipped to £3.89bn in July, from £4.68bn in June, and the lowest level for seven months, the British Bankers' Association said.

But there were signs that the speculative end of the housing market was still buoyant with strong rises in both buyingto-let and equity withdrawal.

The British Bankers Association said the number of home loans dropped 16 per cent; the average size of a loan slipped by £1,100 to £66,400.

Tim Sweeney, BBA director general, said: "The slowing housing market reduced demand for the major banks' mortgages in July and approvals for future loans for house purchase ... also weakened." But there has been a rise in the number of people cashing in the gains made on the rising value of their home.

The BBA said its members lent a total of £837m through equity withdrawal, slightly up on June's £834m and the highest since November 1999.

Equity withdrawal is a concern for the Bank of England as it is a route by which rising house prices feed through to inflation as people liquidate their gains to fund spending sprees.

Meanwhile, the number of people using a mortgage to buy a property and let it out hit a new high in the first half of the year, the Council of Mortgage Lenders said. A total of £1.6bn was lent to 19,300 investors over the six months to June compared with £1.5bn and 18,900 loans in the second half of 1999 and £1.4bn and 19,200 in the first half of last year. The rise prompted a warning to investors of the dangers of gambling on the buy-to-let market.

Peter Williams, CML deputy director general, said: "People need to think carefully about their own circumstances and how they cope with periods during which they are unable to let the property." He said important factors were the type and location of the property and the level of servicing costs.