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Gross lending drops by 7.6 per cent in August


Fears the housing market is overheating and set to collapse have been curbed by a 7.6 per cent drop in gross lending during August.


Council of Mortgage Lenders lending figures for July reveal gross lending dropped to £10.9m in August from £11.8m in July.


It is predicting the market will continue to slow over the coming months but warns an early 1990s style housing bust is still on the cards as total gross lending for the year so far is 31 per cent higher than it was this time in 1998.


Variable rate loans accounted for 57 per cent of new lending in August and fixed rate mortgages accounted for the other 43 per cent.


The average variable rate for new loans offered by lenders in August dropped to 5.48 per cent in August from 5.61 per cent in July and the average for fixed rates also dropped, to 5.57 per cent from 5.63 per cent.


CML director general Michael Coogan says: &#34While it is too early to be certain, it is quite likely that lending growth will begin to slow down over the coming months and we expect to see both lending and house prices rising less dramatically during 2000 and 2001.&#34


Building Societies Association figures for August confirmed the market is cooling off with gross advances dropping to £2,437m from £2,799m.


Net advances dropped to £964m in August from £1,321m in July, approvals dropped fell to £2,297m from £2,547m but savings being pumped into societies increased to £971m from £896m.


BSA director general Adrian Coles says: &#34The levels of outstanding approvals is still healthy suggesting a high level of lending will continue in the autumn.&#34

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