2010.08.3107:41:00UTC+00U.K. Mortgage Lending Sees Surprise Fall

Mortgage lending in the U.K. fell markedly in July even as the number of mortgages approved rose slightly compared to June, official figures showed on Tuesday.

The Bank of England said net lending secured on dwellings increased GBP 0.1 billion, well below the June increase of GBP 0.5 billion. Economists had forecast a GBP 0.7 billion increase.

A total of 48,722 mortgages were approved during July, up from the 48,562 approved in June. Economists had forecast approvals to total 46,500.

However, this was still well below the November 2009 peak of 59,117 and considerably less than the 90,000 monthly average since 1993.

Meanwhile, total net lending to individuals rose GBP 0.3 billion, up 0.8% from a year ago. Consumer credit rose by GBP 0.2 billion, above the June decrease of GBP 0.1 billion.

IHS Global Insight economist Howard Archer said the data highlighted the subdued nature of the British housing market and forecast home prices to fall through 2011. "Housing market data and survey evidence has been consistently downbeat recently and this is no exception," he said.

"Consequently, we continue to suspect that house prices will fall back over the latter months of 2010 and then very likely soften further in 2011," he added. He expects house prices to fall by around 3% during the second half of the year, followed by a drop of around 5% in 2011.

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