Data to flag slowing housing market

By Christina Fincher

LONDON (Reuters) - Mortgage approval figures for October are likely to signal further weakness in housing market, which is already feeling the pinch as buyers struggle with still high prices and tighter credit conditions.

Economists expect the Bank of England data to show approvals for house purchase -- a lead indicator of housing market activity -- fell to 97,000 last month from 102,000 in September. This would be the weakest reading since mid-2005 and mark a drop of around 30 percent on the year.

The figure could be even lower. Some of the economists' forecasts were made before the British Bankers' Association reported last Friday that mortgages approved by its members hit a record low in October, and were down more than 37 percent on the year.

"The BBA numbers suggest the figures could be weaker than many people anticipated," said Philip Shaw, chief economist at Investec.

Shaw has lowered his forecast to 92,000 from 100,000. "The housing market is a vital ingredient to the make-up of Britain's economy and another fall in mortgage approvals would suggest downward pressure on household consumption growth," he said.

Surveys already point to a sharp shift in sentiment. Halifax, Britain's biggest mortgage lender, said property prices fell in October for a second month running. This was the first time they have dropped two months in a row since 2005.

A survey from the Royal Institution of Chartered Surveyors showed inquiries from potential homebuyers fell in October for an 11th straight month and surveyors were more pessimistic about the price outlook than at any time since April 2003.

A cocktail of financial market turbulence, higher borrowing costs and falling confidence is raising concern that the market, which had looked set for a gentle slowdown, could enter a more prolonged downturn.