Slump in mortgages raises fears about property market

The number of mortgages approved for people purchasing a new house fell by 20 per cent during July, a sign that buyers are becoming more cautious about the property market.

The number of mortgages approved for people purchasing a new house fell by 20 per cent during July, a sign that buyers are becoming more cautious about the property market.

The British Bankers' Association (BBA) said just 70,756 loans worth £7.99bn were approved for people moving house during the month, down from 88,859 loans worth £10.35bn during June. At the same time the average value of a mortgage approved dropped to £114,100 from £116,100.

The group said the approvals were "sharply lower than expected" and the fall was across all lenders and all products.

It added that this could be a sign that consumers were becoming more cautious about the housing market, although it was difficult to draw conclusions from just one month's figures.

The number of loans approved for people remortgaging and those releasing equity from their property were also lower than during the previous month.

But while approvals were weaker, advances remained strong, with the leading banks lending a total of £18.08bn to mortgage customers during July, the highest figure on record. Once redemptions and repayments were taken into account, seasonally adjusted net lending rose by £5.41bn, slightly below the six-month average and down on June's strong rise of £6.37bn.

David Dooks, the BBA's director of statistics, said: "There is a record gross lending figure which signifies a competitive market with people moving from one lender to another. The approvals data from July suggests we will see another moderation in net lending in the coming months."

Consumers borrowed £7.98bn on their credit cards during July and, after making repayments, their outstanding debt rose by £529m. Britons now collectively owe £32.55bn on their plastic. New borrowing through loans and overdrafts totalled £3.08bn in July, in line with figures seen over the previous six months.

Once repayments were taken into account, outstanding debt rose by just £219m, less than half the recent average of £556m.