Number of new mortgages plunges
The number of mortgages approved for house purchase fell to a six-month low during August as activity in the property market continued to falter, figures showed today.
A total of 47,372 loans were approved for house purchase during the month, down from 48,346 in July and the fourth consecutive monthly decline, according to the Bank of England.
The level of mortgage approvals seen this year has consistently failed to match the numbers reported for the second half of 2009, prompting economists to warn that the housing market is heading for a second round of price falls.
Today's figures are the latest in a run of gloomy data on the housing market, with Nationwide saying prices fell by 0.9% in August.
The Council of Mortgage Lenders reported lending was at its lowest level for August for a decade, and HM Revenue & Customs figures showed a 6% fall in transaction levels in the month.
Concerns about the economy, job security and rising taxes have caused many potential buyers to put their plans on hold, while the number of properties coming on to the market has continued to increase.
The situation has eased the previous mis-match between supply and demand, which was largely responsible for the price rises seen in 2009.
Vicky Redwood, senior UK economist at Capital Economics, said: "The housing market still appears to be weakening, with the number of mortgage approvals for new house purchase falling from 48,300 to 47,400 in August, the fourth monthly drop in a row.
"And the recent falls in the Royal Institution of Chartered Surveyors' balance of new buyer inquiries suggests that approvals could drop even further."
Howard Archer, chief UK and European economist at IHS Global Insight, said: "Housing market data and survey evidence has been consistently downbeat recently and the very weak Bank of England mortgage lending data for August is a prime example.
"Indeed, the drop in mortgage approvals to a six-month low fuels our suspicion that house prices will fall back by some 10% over the latter months of 2010 and during 2011."
But there was some better news in the Bank of England figures, with net lending, which strips out redemptions and repayments, rising to its highest level since February.
Net lending was £1.66 billion during the month, more than double the recent average of £700 million.
But the steep jump is likely to have been partially caused by the very low level of net lending of just £18 million seen in July.
There was also a slight increase in the number of people remortgaging, with 28,042 loans approved for homeowners switching to a new deal.