Fresh evidence of the slump in the housing market emerged yesterday, with figures showing that new mortgage lending in October fell to the lowest level since the Tories came to office in 1979.
Net advances by building societies to home-buyers fell to pounds 295m last month, less than half the pounds 614m lent in September.
The societies' figures came amid signs that the construction industry is heading into a fresh recession. Orders dropped by 1.4 per cent in the third quarter of 1995 compared to the previous three months. They were 3.1 per cent down on the same quarter last year.
Rob Thomas, a housing analyst at the Swiss banking group UBS, said: "These figures are gloomy. The market this year has not been good, but this is the worst so far."
Other experts suggested the rapid collapse followed two months in which lending only remained at that already low level because prospective borrowers moved swiftly to avoid the Government's mortgage benefit cuts in October.
The Building Societies Association said yesterday that gross lending, which includes people re-mortgaging their homes, fell slightly to pounds 2.6bn in October, compared to pounds 2.72bn the previous month. Net new commitments, the amount societies have agreed to lend in principle, grew to almost pounds 2.9bn from pounds 2.56bn.
Separate statistics from the British Bankers Association showed loans secured on property stood at pounds 509m in October, more than pounds 100m down on the two previous months.
Peter Williams, head of research at the BSA, said yesterday: "Over recent months total lending activity has remained fairly steady compared with previous year levels. However, a significant proportion of overall lending business is believed to have represented re-mortgage activity, rather than lending related to house purchase. The number of loans advanced for actual house purchase has fallen by 17 per cent compared with the corresponding period in 1994." Mr Williams renewed BSA calls for Budget measures to help property buyers, including the abolition of stamp duty on purchases over pounds 60,000.
However, his views were sharply contradicted by Ian Shepherdson, UK economist at HSBC Greenwell, who said: "The building societies are being disingenuous and using statistics they believe will help them in their arguments over the Budget. The fact is that this is another extremely strong set of data."
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