Home loans show cooling market

Demand for mortgages is slowing down

Levels of mortgage lending rose at their slackest pace for two years during August, providing more evidence that the UK housing boom is over.

The British Bankers' Association (BBA) said mortgage lending rose by £4.4bn, down sharply from £5.1bn in July, and the weakest rise since July 2002.

It cited higher household costs and a slowing housing market.

The Bank of England has raised interest rates five times since November, putting a brake on the property market.

'Turning point'

The slowdown in lending came as little surprise given the sudden dive last month in approvals - loans agreed but not yet made.

Prices are going nowhere, activity is slow, and buyers need to be enticed back into the market Miles Shipside, Rightmove

The value of approvals for new loans fell in August to £3.79bn from £4.28bn in July, according to separate figures from the Building Societies Association (BSA).

"The figures suggest that we have reached a turning point in the housing market," said BSA director-general Adrian Coles.

And a third report, from the Council of Mortgage Lenders (CML) said lending shrank to £25bn in August, a drop of 13% on July.

'Stalemate'

The usual autumn pick-up in the market has failed to materialise, according to property website Rightmove.

The number of homes available to buy has reached its highest level for nearly a year as buyers steer clear of the property market in response to recent base rate hikes, it added.

Rightmove said there was a "housing stalemate" as the market switched from a sellers' market to a buyers' market.

"Prices are going nowhere, activity is slow, and buyers need to be enticed back into the market," said Miles Shipside, commercial director of Rightmove.

The fall in house prices was attributed to a lack of first-time buyers as they found themselves increasingly priced out of the market.