UK mortgage lending plunges to £86 million
Mortgage lending dived sharply in July as activity in the housing market remained subdued, figures showed today.
Net lending, which strips out redemptions and repayments, totalled just £86 million during the month - a steep fall from June's £518 million, according to the Bank of England.
The figure was the second lowest since the Bank's records began in 1993, although there have also been two months when net lending was negative.
The number of mortgages approved for house purchase edged ahead only slightly during the month, rising to 48,722, well down on the levels of more than 100,000 a month seen during the housing boom.
The figure was also down on November's recent high of just over 59,000, as the housing market failed to benefit from its traditional summer bounce.
The subdued lending figures have added to concerns among economists that the housing market is heading for a fresh round of price falls.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "Although the Bank of England somewhat surprisingly reported that mortgage approvals edged up in July, the fact remains that they were still at a very low level and point to ongoing muted housing market activity.
"Housing market data and survey evidence has been consistently downbeat recently and this is no exception.
"Consequently, we continue to suspect that house prices will fall back over the latter months of 2010 and then very likely soften further in 2011."
He expects house prices to fall by around 3% during the second half of this year, followed by a drop of around 5% in 2011.
There was a slight increase in the number of people remortgaging during July, with approvals for those switching to a new deal reaching 26,951, slightly up on the previous six-month average, but there was a small dip in those unlocking equity from their home or taking out a buy-to-let mortgage.
Unsecured borrowing also remained subdued during July, with net lending rising by £173 million.
Within the total credit card borrowing rose by £213 million, but lending through loans and overdrafts contracted by £41 million.