U.K. house prices fell the most in two years and mortgage approvals dropped to an eight-month low as economic uncertainty hurt demand for property and banks tightened lending conditions. Home values dropped 1 % in March, the biggest decline since February 2010, Nationwide Building Society said in an e- mailed statement today. Lenders granted 48,986 property loans to Britons in February, compared with 57,899 in January, the Bank of England said in a separate report in London. Bank of England Governor -Mervyn King- said this week that the financial crisis hasn't gone away as banks continue to shore up balance sheets to protect themselves from the euro-area debt crisis. The housing market may face further pressure as job cuts undermine consumer confidence, and a central bank survey published today showed banks expect mortgage availability to decline “slightly" in the second quarter. “U.K. data releases this morning were in the round somewhat disappointing," said David Tinsley, chief U.K. economist at BNP Paribas SA and a former Bank of England official. Today's data “confirms that the housing market remains depressed by any historical comparison" and signals the economy is going to have “a rougher road in the second quarter." In a separate report, the Office for National Statistics said U.K. services industries grew 0.2 % in January, adding to evidence that the economy gained momentum in the first quarter. Output rose 1.8 % from a year earlier. Services account for 76 % of the British economy. March's house-price decline was the third drop in four months and left the average value at 163,327 pounds ($259,000), Swindon, England-based customer-owned lender Nationwide said. From a year earlier, prices fell 0.9 %, the first annual drop in six months. Part of the decline in mortgage approvals in February may reflect the end of an exemption for first-time homebuyers from a tax on house purchases below 250,000 pounds, BNP's Tinsley said. While the tax holiday ended on March 24, Tinsley said some buyers may have sought home loans early to ensure they beat the deadline, as Bloomberg stated. Mortgage availability decreased this quarter for borrowers with small deposits, while credit scoring criteria were tightened and more loan approvals rejected, the Bank of England's credit conditions survey showed. Lenders predicted that the availability of mortgages for all borrowers will fall for the first time in two years in the next three months. To be mentioned that, Britain's economy shrank 0.3 % in the fourth quarter from the previous three months, more than an initial estimate, data yesterday showed. Real household disposable income fell 1.2 % last year, the biggest drop since 1977.
