Mortgage lending slows to a canter

The first signs that the galloping housing market may be slowing to a canter came yesterday with figures showing that mortgage lending has fallen back for the second month running.

After hitting record levels during the summer, gross mortgage lending by banks, building societies and other institutions dropped to £10.4bn in September. This compares with £10.8bn in August and £11.8bn in July.

The figures emerged on the day the government published its guide to the "mortgage maze" - listing 10 key questions which it says will help people choosing a mortgage.

Commenting on the new figures, lenders said they should help to allay fears that the housing market is overheating and heading for a repeat of eighties-style boom and bust.

Last month's quarter-point rate rise "would appear to have taken any excessive heat out of the housing market," said Adrian Coles, director-general of the Building Societies Association. However, the market remains very healthy and looks set to continue on a "buoyant, but not booming" path.

A breakdown of the figures shows that lending for house purchase slipped back slightly, from £8.1bn in August to £7.9bn in September, while remortgaging fell more noticeably, from £2.3bn to £2bn.

Michael Coogan, of the Council of Mortgage Lenders, which compiled the data, believes "we have now reached a plateau".

While demand for loans remains strong - last month's gross lending total was 20% higher than September 1998 - this year's surge in lending and house prices is not expected to be repeated next year.

Earlier this week, Nationwide building society predicted house prices would end this year 11% up on December 1998.