Mortgage repayments outstripped new lending in August for the first time as speculation of a stamp duty cut froze the housing market, official figures showed today.
The Bank of England’s latest data showed “negative” net lending of £700 million – the first such instance since its records began in 1993 – as buyers sat on their hands ahead of the Government’s September move.
The Treasury eventually announced it would lift the stamp duty thresholds from £125,000 to £175,000 in a bid to revive the housing market.
Mortgage approvals crept higher from 32,000 to 33,000 in September, but show little sign of recovery from the record lows of August, the figures showed.
Banks lent a net £2.2 billion in September, but this remains well below the £3.5 billion average of the past six months.
Further rate cuts likely
Experts said the figures reinforced pressure on the Bank of England to slash rates by at least another 0.5% at its next meeting.
Howard Archer, chief UK and European economist at Global Insight, said the data suggested the downturn in the housing market “still has a long way to run”.
“To put the figures into perspective, total mortgage approvals of 98,000 in the third quarter of 2008 failed to match the total of 101,000 in September alone in 2007,” he said.
Vicky Redwood, economist with Capital Economics, added that the figures were consistent with house price falls of up to 25%, compared with the 13% seen so far.
“With credit still restricted, potential buyers will find it hard to get a mortgage. Meanwhile, lenders have not passed on October’s rate cut in full to new mortgage rates,” she said.
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