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Tuesday 01st of June 2010
September 29, 2009    

New mortgage lending dips in August

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by Gill Montia

New mortgage lending fell back in August, according to the latest Trends in Lending report from the Bank of England.

Approvals for house purchase loans stuck at 52,317, compared to 52,404, in July.

The dip represents the first fall in new mortgage approvals since November of last year, when the number of homebuyer loans sanctioned by banks and building societies fell to a record low of 27,424.

While seasonal fluctuations are inevitable, there is already evidence that the UK’s housing market rally is at an end.

According to Land Registry figures, which are widely regarded as the most accurate measure of house prices in England and Wales, the average value of a property declined by 0.1% in August, compared to a month earlier.

Whereas in July, the average price of a home jumped 1.7%, compared with June.

Ernst & Young Item Club has already called the price rises seen in recent months a “false dawn” and predicted that the average value of a UK home will not revisit to its 2007 peak for at least another five years.

The economic forecasting group has also warned that prices will drop again in 2010 on the back of rising unemployment and restricted access to mortgage finance.

A similar view is held by Jones Lang LaSalle, the real estate and investment management firm.

It sees the current rally as irrational and is forecasting a W-shaped recovery of the market with prices dropping by around 7% in 2010, and only begin a sustained recovery in 2012.

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