Slump in mortgages and poor shop sales fuel economic fears

Hopes of a rebound for the UK economy were dealt a fresh blow yesterday by figures showing the housing market has weakened and that the Easter shopping weekend turned out to be a damp squib.

Demand for new mortgages has slumped by 37 per cent since its peak of last summer, the Council of Mortgage Lenders said. Househunters borrowed £7.8bn in March compared with the record £12.4bn in July 2002, CML said.

The message was echoed by other industry bodies. Mortgage lending in March was £4.8bn, compared with £5bn in February, the British Bankers' Association said.

And the Building Societies' Association said mortgage approvals – a pointer to house prices in the months ahead – fell from £3.9bn to £3.5bn.

Analysts said the figures echoed a welter of other evidence of an end to Britain's seven-year housing boom. According to the Royal Institution of Chartered Surveyors, prices have fallen at the fastest rate in eight years for two months running. Surveys of prices in estate agents' windows have shown a sharp slowdown, led by price falls in parts of London and the South-east.

The industry is wary of calling an end to the boom in the housing market, which has been highly resilient to economic shocks since 1997.

Michael Coogan, CML director general, said: "It's still too early to say whether the housing market has yet passed the turning point towards a slowdown in house prices."

Yesterday's CML figures showed that remortgaging had surged 28 per cent in the past seven months, which should support further spending. Yet there was little sign of that over the Easter weekend. The retail analysts FootFall said the number of visitors to the main shopping centres was 4 per cent down on Easter 2002.