Slide in mortgage lending confirms housing slowdown

A hharp fall in mortgage lending and new loan approvals last month has provided fresh evidence of a slowdown in the housing market.

Lending by Britain's major banks dropped by 12 per cent between December and January, the British Bankers' Association (BBA) said yesterday.

Its members lent a total of £4.4bn for house purchase last month, down from £5.1bn in December. David Dooks, the BBA's statistics director, said: "In the current state of housing market sentiment, the relatively slower pattern of mortgage demand looks likely to continue in the early months of 2005."

The Council of Mortgage Lenders (CML) said the number of loans dropped to 63,000 last month, down from 85,000 in December and 97,000 in January last year.

Peter Williams, the CML's deputy director general, said: "These figures show beyond doubt the recent slowdown in the housing market. But the picture this year is likely to be lumpy rather than smooth, and it is impossible to gauge the future direction of the market from one month's figures."

The CML said some of the decline was seasonal and entirely expected in any January.

The BBA and CML figures relate to purchase decisions taken some 10 weeks earlier and Mr Williams said anecdotal evidence pointed to a pick-up in activity in the new year that could feed into mortgage lending in the spring.

The Building Societies Association (BSA) said mortgage approvals by its members - which relate to deals struck in the previous month - were broadly unchanged from December at £3.22bn.

Adrian Coles, BSA's director general, said: "It is notable that over the last three months lending has been broadly stable - a good indication that fears of a sudden crash are overstated."

The pound rose on the financial markets as analysts took comfort from the fact that there was little sign of a panic response among homebuyers to speculation of price falls.

Howard Archer, a UK economist at the consultants Global Insight, said: "The overall impression from the latest survey evidence and price data continues to be that the housing market is slowing steadily rather than sharply."

On the unsecured lending side, lending rose in January to £1.1bn from December's £700m. Total annualised private sector credit growth, at 13.4 per cent, was close to its recent average.