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Mortgage approvals still falling

The number of new mortgages approved in the UK fell in October to their lowest level since January 2000, figures from the Bank of England show.

New mortgages fell to 83,000, compared with 88,000 in September - the fifth monthly drop in a row. The level of mortgage borrowing was at its weakest since March, the Bank said.

Economists say five interest rate rises since November 2003 appear to be having an effect but the housing market does not appear to be heading for a crash. The Bank's figures show mortgage borrowing rose by £7.52bn ($14.2bn) in October, following an increase of £7.57bn in September.

Levelling out

"The housing market has slowed but there is no evidence to suggest a collapse and the adjustment over the summer now appears to have ended," said Philip Shaw at Investec.

"It looks like we are seeing some levelling out and we shouldn't see a collapse - the figures are down, yes, but not significantly so."

The risk is that if the slowdown in activity levels continues at its current pace, house prices are likely to fall sharply
John Butler, HSBC
Interest rates were 5.75% in January 2000.

John Butler, economist at HSBC, said the number of new mortgage approvals have returned to the level they were at before a string of interest rate cuts saw the rate drop to 3.5% in 2003.

"The risk is that if the slowdown in activity levels continues at its current pace, house prices are likely to fall sharply." "However, if they stabilise around current levels, which are in line with the historic average, then house price inflation is likely to slow sharply but it would not be indicative of outright price falls."

Growth in unsecured lending, such as personal loans and credit cards, also slowed last month, dropping to its lowest level since November 2001. Unsecured lending, increased by £1.55bn in October, down on September's £1.62bn, but the figures were in line with expectations.

Story from BBC NEWS:m BBC NEWS.

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