Finances remain tight despite the UK having emerged from recession
Figures revealing a sharp drop in mortgage approvals in January have confirmed that the UK housing market made a slow start to the year.
The Bank of England said that the number of home loans approved for house purchases in January fell by 17% compared with the previous month.
The 48,198 approvals was the lowest number for eight months, but still 43% higher than a year earlier.
Experts have said the end of the stamp duty holiday was behind the drop.
The stamp duty threshold dropped back to £125,000 on 1 January, prompting a rush on mortgage approvals and completed home sales in the final months of 2009.
The government concession, which had temporarily pushed the threshold up to £175,000 for just over a year, had been aimed at halting the rapid slump in the property market.
Gross mortgage lending fell from £13.5bn to £10.2bn in January, with commentators also pointing to the severe winter weather as affecting housing market activity.
A range of groups, including the Council of Mortgage Lenders and the British Bankers' Association, have said that lending and activity dropped at the start of the year.
Last week, Nationwide building society pointed to the slowdown in lending as the reason behind the first fall in UK house prices for 10 months.
The Nationwide said average property values dropped by 1% in February compared with January, with the average home worth £161,320.
All sectors - including the mutual sector - had felt the effects of the slowdown at the beginning of the year, according to Adrian Coles, director general of the Building Societies Association (BSA).
"Activity was subdued and this has been felt by all lenders. Low activity in the month was expected following the surge of buyers aiming to beat the end of the stamp duty relief in December," he said.
"The adverse weather conditions experienced at the start of the year have further suppressed market activity."
Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors (Rics), said: "Our judgement is that this downturn in transactions will prove temporary and that buyer interest will have rebounded in the February data."
The Bank of England figures also indicate that the record low Bank rate of 0.5% - and low variable mortgage rates - has deterred people from signing up to new fixed-rate mortgages. The number of homeowners remortgaging dropped to 23,611 in January, from 27,322 in December.
Borrowers' safety-first approach to borrowing on credit cards, personal loans and overdrafts appears to have eased, consumer credit figures show.
Mortgage lending has been hit by the end of stamp duty relief
Some £500m was borrowed above repayments in January, up from £265m in the previous month.
Within this, net credit card borrowing increased by £171m and other loans and advances increased by £330m.
Repayments had outstripped borrowing for most of the second half of 2009 as borrowers also found it difficult to secure further loans.
For the 11th month in a row, savers took out more money than they deposited in building societies. This reached £755m in January, in figures which now include the mutually-owned Co-op Bank - which owns the former Britannia Building Society.
"January is typically a challenging month for savers as many start to repay debt accumulated over Christmas," Mr Coles said.
"Nonetheless, mutuals will continue to find it difficult to attract savers as long as the Bank rate remains low and the market is distorted by part-nationalised banks."
He welcomed the move that would end the 100% guarantee on savings held with Northern Rock. In three months' time, the safety net will revert to the first £50,000 for each saver in Northern Rock that is offered under the Financial Services Compensation Scheme.