Fall in value of mortgages indicates housing slowdown

Further evidence of a slowdown in the housing market emerged today as figures revealed a 15% drop in the total value of mortgages approved during August.

The British Bankers' Association said 213,300 new home loans worth ?13.11bn were approved by the major banks during August. That is 10% less by number and 15% lower in value than those approved during July.

It added that the value of the average loan for house purchase also fell for the second month running, dropping to ?87,600 from ?88,800. The number of mortgages approved for buying new houses also dropped by 19% to 77,007, while loans for remortgaging declined slightly, and ones for equity release remained broadly unchanged.

BBA executive director Simon Pitkeathley said: "These figures show some signs of a slowdown in the housing market. As selling prices, particularly in some areas of the country, have outstripped what buyers are prepared or able to pay, housing market activity has fallen.

"Weaker approvals data for house purchase loans in August should therefore lead to a future moderation in lending."

He added that although remortgaging and equity withdrawal loans were slightly weaker during August, demand was significantly stronger than at the same time last year, suggesting this would sustain mortgage lending into the autumn.

Overall a total of ?14.32bn was advanced during August, only slightly below July's record of ?14.49bn and 21% higher than in August last year.

After repayments were taken into account, lending increased by ?4.85 bn, the second highest monthly rise ever after May's record of ?5.19bn.

Britons spent ?5.94bn on their credit cards last month, 10% less than July's record of ?6.6 bn. But a 15% fall in the amount people repaid meant outstanding debt on plastic increased by ?320m, well up on the recent average of ?260m.