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Last Updated: Thursday, 25 October 2007, 14:46 GMT 15:46 UK
Bank mortgage lending sees slump
For Sale signs
Mortgage deals are slumping, say the banks
There was a slump in fresh mortgage lending by some of the UK's biggest banks last month.

The British Bankers' Association (BBA) said that new mortgage approvals for house purchase stood at 52,685, down by 27% on September last year.

If the figures are backed up by those from the Bank of England next Monday, it will confirm that the market is slowing rapidly.

The BBA said mortgage lending was the lowest for any September since 2000.

"Lower amounts of new mortgage lending and fewer loans approved for house purchase signal a weaker outlook for the mortgage market," said David Dooks of the BBA.

"Particularly if loan supply reduces in the aftermath of the recent financial markets' difficulties and borrowing costs remain at current levels," he added.

Rate rises

The number of new mortgages being approved for house purchase, as opposed to people moving their mortgage deals but staying put, is a good indicator of near-term activity in the market.

It appears that the five increases in interest rates since the summer of 2006, along with worries caused by last month's crisis at the Northern Rock bank, have finally dampened the ability of borrowers to move house.

"Slowing housing demand is expected to increasingly feed through to dampen house prices over the coming months," said Howard Archer of Global Insight.

The members of the BBA account for roughly two-thirds of all UK mortgage lending.

As such, their monthly figures do not always tally with those from the Bank of England, which cover the whole of the UK property market.

The Bank's own figures for new mortgage approvals have been showing a more gentle slowdown since a year ago.

But last week, the Council of Mortgage Lending revealed that the value of gross mortgage lending had also fallen, for the third month in a row.

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