Page last updated at 10:22 GMT, Monday, 29 March 2010 11:22 UK

Mortgage slowdown continues, Bank of England data shows

For sale signs
The mortgage market has been rocky in recent years

Mortgage approvals fell in February marking a continued slow start to the year in the UK housing market, Bank of England figures have shown.

The number of mortgages approved for house purchases dipped by just over 1,000 to 47,094, the figures showed.

This was the third consecutive monthly fall and came after a sharp drop the previous month when the end of the stamp duty holiday hit the market.

Meanwhile, building societies saw an inflow of savings in February.

Figures from the Building Societies Association (BSA) showed balances held in savings accounts at mutual institutions increased by £807m in February - the first rise for a year.

Market hangover

Various studies have indicated the housing market was hit at the start of the year owing to the end of the temporary stamp duty relief and the poor weather.

It remains to be seen if the Budget moves are enough to raise transactions and engineer an upturn
Philip Shaw, Investec

Figures from the British Bankers' Association and now the Bank of England suggest this hangover has continued.

The Bank of England's figures showed the number of mortgages approved for house purchases was lower than the average of the previous six months, which stood at 55,130.

This was down 21% on the recent peak in approvals in November, and the lowest for nine months.

Howard Archer, chief UK economist at Global Insight, said: "The muted Bank of England mortgage approvals data reinforces our suspicion that house prices will be erratic and prone to corrections in 2010, and will probably be no better than flat over the year."

Philip Shaw, economist at Investec, said: "The main message is that mortgage approvals have stalled over the past few months, indicating a lull in the housing market.

"It remains to be seen if the Budget moves are enough to raise transactions and engineer an upturn."

In the Budget, Chancellor Alistair Darling said that, for the next two years, first-time buyers purchasing properties worth up to £250,000 would pay no stamp duty.

Piggy bank
Savings deposited in the mutual sector have increased

He also proposed an increase in stamp duty on properties worth more than £1m, although this would not come in until April 2011, well after the election.

The Bank of England's figures showed the number of people remortgaging increased in February to 27,297, a rise from January and ahead of the monthly average over the previous six months of 25,985.

Borrowing on credit cards and through personal loans saw its highest increase since November 2008, the Bank's figures showed.

Consumer credit rose by £528m in February, up from £349m the previous month. The February figure included a £374m increase in credit card lending and a £154m rise in other loans and advances.

'Encouraging' signs

Building societies have found it tough to attract funds in recent months, as people searched for higher returns or paid off debts.

But the BSA said the trend reversed in February, with an increase in savings funds to the mutual sector - which includes building societies and the Co-operative Bank.

"It is encouraging to see the mutual sector attract a net inflow of retail deposits in February, ending a run of 11 monthly net withdrawals," said Adrian Coles, BSA director-general.

"However, attracting funds in the retail market remains challenging, although we look forward to more normalised market conditions with the removal of the 100% deposit guarantee of Northern Rock.

"It is too early to tell whether the inflow that mutuals received from savers this month is a one-off or if it represents a reversal of the recent trend of outflows."

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