Mortgage lending continues to fall

Demand for mortgages fell last month as the booming property market showed signs of slowing down, figures revealed today.

The British Bankers' Association said demand for home loans fell during September for the first time since March, suggesting the housing market had reached its peak.

The group said total mortgage lending by its members during September was down 17% compared to August's figure, with banks advancing ?9.78bn in loans compared to ?11.8bn the previous month.

Once repayments and redemptions were taken into account, net lending, in seasonally adjusted terms, increased by ?3.67bn - 9% lower than August's rise of ?4.03bn.

Peter Vipond, head of research and statistics, said: "The rate of growth has clearly slowed because the housing market is coming off its peak.

"It's not declining but it is slowing down, which is in line with what we think is happening to the economy generally."

While there is usually a fall in mortgage demand during September, this year's figures were much weaker than in previous years, Mr Vipond added. "Given that we have seen gross lending increase in every month since March, in contrast to summer and autumn last year, when demand gradually eased, it is not surprising that we have eventually seen a fall."

Consumer credit, which includes loans and credit cards, rose by ?666m during September. Although this figure was down on August's increase of ?839m, the group said, in seasonally adjusted terms, it was "marginally above the recent trend", and well up on the rise seen in September last year.

Mr Vipond said: "People are continuing to go and buy new washing machines, and new cars and make purchases with the relatively cheap credit available in this country."

He said it was consumer and government spending which was driving the economy at the moment, and the terrorist attack on September 11 seemed to have had little impact on people's spending.

He added: "There is no evidence to believe we are going into a recession or that there is one [now]."

During September, new personal loans totalled ?3.17bn, 10% less than in August. Repayments of existing loans remained fairly strong, leading to an increase in net lending of ?597m, only 4% higher than August's rise, and in line with recent monthly increases of ?610m.

Spending on credit cards was 11% lower than the previous month, totalling ?5.17bn. Net lending was down on August's figure, but once seasonal factors had been taken into account, there was an underlying rise in credit card borrowing of ?172m during September - the highest increase since May.