Massive Drop in Mortgage Lending

Mortgage lending crashed in August, with advances falling to just 5% of the previous month’s total. Net lending in the month amounted to only £143 million, the lowest figure ever recorded by the Bank of England’s statistics series which began in 1993. July’s sum was close to £3 billion.

The slide was almost certainly caused by the combination of falling house prices and the credit crunch. Speculation over the Government’s recent stamp duty announcement is also believed to have caused house buyers to delay borrowing during August.

Total mortgage advances totaled £19.19 billion during August, the lowest figure for 6 years. But it was net lending, which strips out repayments and borrowers remortgaging elsewhere, that took a hammering.

The situation looks set to worsen, with the number of mortgages approved for house purchase declining to a new record low of 32,000 during the month.