FTSE fades in face of housing market slump

The London market was on the back foot once more today as early gains faded in the face of further bad news from the housing market.

The FTSE 100 Index dropped 45.8 points to 5621.4 by mid-morning, with retailers among those under pressure.

Lending figures showed that the number of new mortgages approved for people buying a house dived by 20% during May to reach a record low.

The news failed to halt the shares rally by embattled lender Bradford & Bingley, which saw shares jump as much as 15% at one stage on news that major investors are planning to sidestep the company’s current rights issue plan.

The alternative proposal, which was revealed last night, would see B&B drop the planned sale of a 23% stake to TPG Capital, in favour of a £400 million cash injection led by investment group Resolution.

The move was welcomed by shareholders in the FTSE 250 Index, with B&B shares up 7p to 73p.

Among blue-chip banks, Barclays rose 1.75p to 301.5p, but Halifax Bank of Scotland lost early trading gains to fall back below its rights issue price - down 1.5p at 268.75p.

One of the biggest gains in the top flight came from Thomas Cook after the tour operator said trading for the summer remained strong in “all major markets”. The stock rose 2p to 236.25p, a gain of 1% which also caused rival TUI Travel to lift 3p to 208.75p.

But retailers were suffering losses, with Next off 29.5p at 965.5p and Tesco down 8.6p at 369.4p.

Airline British Airways was also down 7.25p at 205p as oil prices surged close to 138 US dollars a barrel.

Debenhams rose 3% in the FTSE 250 after the company brought forward a trading statement in an attempt to draw a line under recent speculation about its finances. The update showed a surprise rise in like-for-like sales and caused shares to rise 1.5p to 43.75p.