Weak mortgage data shows housing market woes

Published 26th Jul 2011

Net mortgage lending fell to its lowest in more than a decade in June, data showed on Monday, and there is little prospect of the housing market strengthening as Britons' finances remain under severe pressure.

Official figures on Tuesday are expected to show Britain's economy grew by a lacklustre 0.2 percent between April and June, after stagnating in the previous six months.

Figures from the British Bankers' Association showed the number of home loan approvals rose to 31,747 in June from 30,803 in May -- the highest since July 2010, but still 6 percent lower than a year ago.

Net mortgage lending, meanwhile, grew by just 0.5 billion pounds -- its weakest pace since 1998 -- reflecting lower-than-average gross mortgage lending, and a rise in repayments by homeowners.

The figures followed a survey showing house prices fell for a third month running in July, and analysts said the BBA data reinforced expectations for further declines in the coming months.

"We anticipate that house prices will trend down modestly over the coming months as squeezed purchasing power, tightening fiscal policy, a soft labour market and worries over the economic outlook weigh down on potential buyers," said Howard Archer, economist at IHS Global Insight.

"On top of that, there are still significant difficulties in getting a mortgage -- particularly for first time buyers."

British house prices started falling in mid-2010 after a brief post-crisis bounce, partly due to tight credit and people's reluctance to take on debt at a time when personal finances are being squeezed between soaring inflation and muted wage growth.

A survey by research firm Markit showed Britons' household finances deteriorated in July to their lowest since March 2009 -- a month after it started compiling the data -- due to the soaring cost of living and higher debt levels.

Markit said 38 percent of households saw their finances deteriorate over the month, compared with only 6 percent that noted an improvement, resulting in an index reading of 34.4 in July -- well below the 50 level that separates improvement from deterioration.

"The Markit survey highlights the financial pressure on households and ... does little to dilute belief that consumers will rein in their spending for an extended period and markedly hold back overall economic growth," IHS Global Insight's Archer said.

Source: ' Reuters '

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