UK home loans slump; manufacturing troubled

03 March 2009

The latest figures from the Bank of England show that mortgage lending in the UK plunged by more than 60 per cent during January, falling to just 10 per cent of its level 12 months ago.

Net mortgage lending was £690 million during the month, down from £1.79 billion in December. It was the second lowest monthly total recorded by the bank since it began to keep statistics in this format in April 1993, and represented a steep dive from the £6.9 billion lent in January last year. It was less than half of analysts' predictions for a £1.5 billion increase. Mortgage lending has fallen from a peak of about £10 billion per month at the height of the market boom.

The total number of approvals for home loans was largely stable at around 31,000 in January, the bank said. Separate figures from Hometrack, the housing data group, suggest the average house sale price is now 88 per cent of the figure at which a property is first marketed.

This reinforces the message coming from all parts of the property market - that househunters are demanding bargains amid forecasts of further price falls.

However, Hometrack's numbers do present evidence of signs of life in a previously moribund market, with new buyer registrations rising by 17 per cent and agreed sales up by 36 per cent in February, after falls in the previous few months. A few agents are reporting multiple bids for some properties, with correctly priced homes going under offer relatively quickly.

However at the same time, a survey has shown that British manufacturers slashed jobs and output at a record pace in February as export orders plunged. UK manufacturing shrank for the tenth consecutive month and consumer lending rose at the slowest pace since at least 1993, evidence Britain's recession is intensifying, the Chartered Institute of Purchasing and Supply and Markit's research said in a report today.