Bank signals end to homes boom

FRESH evidence of a cooling housing market has emerged from Bank of England figures showing the number of new mortgages signed off by banks and building societies fell sharply in September. There were 102,000 mortgage approvals during the month, down nearly 10% on August's 113,000. The total value fell to £13.8bn from £14.5bn a month earlier.

Figures last week from the British Bankers' Association showed the average mortgage fell by £600 to £75,900 in September, with 11% fewer homeowners remortgaging. It is the latest piece of the jigsaw pointing to the end of the housing market boom.

Nationwide Building Society is expected to say later this week that property values dropped sharply in October after leaping 2.8% in September.

But in a sign that consumers remain confident about their financial prospects and their ability to repay debt, unsecured consumer credit rose by £1.5bn in September, up from £1.2bn in August. Spending on credit cards surged to £409m from £329m the previous month. The news suggests people are keen to take advantage of the most attractive loan rates in 40 years.

The mixed messages on the strength of the consumer side of the economy, which has been keeping the economy as a whole afloat, complicates the task of the Bank's monetary policy committee which meets to set interest rates again next week. While the Bank will be keen to bolster confidence and property values by trimming rates again, it will be wary of fuelling an unsustainable borrowing binge. The City is pricing in another quarter-point cut in rates by Christmas.

Meanwhile, Deloitte & Touche warned the world may be on the brink of the worst economic slump since the Second World War. The firm's economic adviser Roger Bootle said that although Britain will escape recession, the economy will expand by only 1.7% next year and interest rates will fall by another half-point to 4%.

A separate survey from Ernst & Young found profit warnings soared to 135 in the third quarter - the highest since the survey began four years ago. The findings prompted a warning to firms to plan for lay-offs and asset sales and guard against complacency.

Sterling jumped a cent to $1.4460, with the rise attributed to news of corporate deals. The oil price leapt 33 cents to $21.35 a barrel on mounting support for a cut in crude production.

World on brink of slowdown