Mortgage lending slows, says Bank

There are fewer buyers around for houses, new or old

The property market is going through a clear slowdown, according to figures from the Bank of England.

The number of mortgages approved for house purchase fell in August to 109,000, down from 120,000 a year ago.

The increase in net mortgage lending in August was also down by 11% on the same month last year.

The Bank's analysis makes it clear that mortgage lending has been slowing down since the start of the year, as higher interest rates have taken effect.

Downturn

The number of new mortgages approved for house buying - a good indicator of future trends in the property market - touched a recent peak of 128,000 in November 2006.

We expect... a further fall in activity levels in the housing market over the coming months Simon Rubinsohn, RICS

Although the figures are erratic from month to month, the trend since then has been downward, with the monthly average for the past six months now standing at 112,000.

The Bank of England has raised interest rates five times since the summer of 2006, and the latest figures add to the growing evidence that this is at last having a dampening effect on the UK property market, outside London.

Last week one of the UK's biggest mortgage lenders, the Nationwide building society, reported that annual house price inflation had fallen for the third month in a row, to stand at just 9%.

Earlier in September, the Royal Institution of Chartered Surveyors said that in August slightly more of its members had seen house prices fall locally than saw them rise.

That was the first time this had happened since October 2005.

"This data predates the latest round of turmoil in credit markets, the Northern Rock saga and subsequent hikes in some tracker mortgage rates," said the RICS chief economist Simon Rubinsohn.

"RICS' monthly housing market survey is showing a sharp drop in new buyer enquiries and we expect this to be reflected in a further fall in activity levels in the housing market over the coming months," he added.

Housing equity

Other figures from the Bank also showed a drop in home owners' enthusiasm for cashing in on the increased value of their properties.

Mortgage slowdown? 109,000 new approvals Net lending down 11% Equity withdrawal drops to £10bn Source: Bank of England

Housing equity withdrawal, where owners take out bigger mortgages to spend on things other than their homes, fell from £13.1bn in the first quarter of the year to £10bn in the second quarter.

It was the third quarter in a row that this sort of borrowing has dropped and probably reflects the higher cost of borrowing seen since the middle of 2006.

Since the start of 2000, UK home owners have borrowed £287bn, providing a very significant boost to peoples' incomes.

In the second quarter of this year, housing equity withdrawal increased the after-tax income of all UK households by 4.5%.