April 29 (Bloomberg) -- U.K. mortgage approvals fell in March to the lowest level in at least nine years as banks shrank their lending businesses to cope with the credit-market freeze.
Banks granted 64,000 loans for house purchase, compared with 72,000 in February, the Bank of England said in London today. The result was the lowest since the series began in 1999. Economists predicted a drop to 66,000, according to the median of 30 forecasts in a Bloomberg News survey.
The Bank of England has offered to swap government bonds for mortgage securities in a bid to restore confidence in the financial system, which may kick-start the market for home loans. U.K. house prices fell the most in more than three years this month, Hometrack Ltd. said yesterday.
``The mortgage approval figures really emphasize that we are in the throes of a very pronounced slowdown in the housing market,'' Erik Britton, an economist at Fathom Financial Consulting in London who used to work at the Bank of England, said in a Bloomberg Television interview.
The pound was little changed after the report and traded at $1.9832 at 9.44 a.m. in London. Against the euro, it traded at 78.54 pence, around the same level as before the mortgage figures.
Net lending on homes fell to 6.9 billion pounds ($14 billion) in March, the lowest in three years, from 7.3 billion pounds the previous month, the Bank of England said. The value of mortgages granted by customer-owned lenders fell to 2.9 billion pounds, the least since September 2004.
Capital Boost
HBOS Plc, the U.K.'s biggest mortgage lender, today announced plans to sell 4 billion pounds of shares to investors to bolster capital depleted by writedowns and the deteriorating housing market. Bradford & Bingley Plc, the U.K.'s biggest lender to landlords, said April 22 it took more credit writedowns in the first quarter and cut lending.
House prices declined 2.5 percent last month, the most since 1992, according to HBOS. The average cost of a home in England and Wales dropped 0.6 percent in April, the most since December 2004, to 173,100 pounds, Hometrack said.
The British economy grew 0.4 percent in the first quarter, the slowest pace since 2005, the Office for National Statistics said on April 25. The International Monetary Fund forecasts U.K. growth of 1.6 percent in 2008, the least since the end of the last recession 16 years ago.
Consumers have still kept spending, adding to record debts of 1.4 trillion pounds. Retail sales rose 2 percent in the first quarter, the strongest pace for the first three months of the year since 2004.
Today's data show Britons were more reluctant to borrow on unsecured debt to fund their spending. Net consumer credit fell to 1.2 billion pounds in March from 2.3 billion pounds in February, as the value of personal loans and overdrafts dropped by more than half.
Bank of England policy makers this month reduced the benchmark interest rate for the third time since December to 5 percent to stave off a recession. The bank will keep its benchmark rate unchanged on May 8, according to the median forecast of 30 economists surveyed by Bloomberg News.
