Mortgage approvals in the United Kingdom dropped, as expected, to a nine-month low last month, adding to signs that credit constraints are delaying the recovery of the UK housing market.
According to the Bank of England (BOE) yesterday, lenders granted 47,094 loans to purchase homes compared with 48,099 in January, making it the lowest figure since May last year.
The property market in the UK is showing signs of uncertainty, as the economy struggles to strengthen its recovery from the worst recession since World War II.
The Labour Party of Prime Minister Gordon Brown, which faces elections by June, eliminated a tax for first-time homebuyers in a move to unblock strains in the market.
“This reinforces our belief that house prices will be no more than flat this year,” said Howard Archer, an economist from IHS Global Insight in London.
“The government’s stamp-duty holiday will probably give the market a boost but the economic fundamentals of the housing market are pretty poor at the moment.”
Recent data on house prices were mixed up. Lloyds Banking Group plc’s Halifax division said the average cost of a home dropped 1.5 percent last month, while Hometrack Ltd said that home prices rose 0.3 percent this month from February.
PM Brown’s government is trying to help potential homebuyers in the run-up to the election.
The Bank of England also said that net mortgage lending rose by £1.6 billion, the highest since December 2008.
The latest figure showed that households added to their unsecured debts in February. Net consumer credit increased by £528 million, and credit-card lending rose to £374 million, while overdrafts and personal loans jumped by £154 million.