Mortgage lending slumps

Last Modified: 18 Jul 2008
Source: ITN

The rate at which mortgage lending is falling has accelerated as the credit crunch tightens its stranglehold on the market.

Banks and building societies advanced a total of just £23.8 billion during June, the lowest level since February 2006, the Council of Mortgage Lenders said.

The figure was also 3 per cent lower than the amount lent in May and 32 per cent down on advances in June 2007.

CML director general Michael Coogan said: "Market activity during a traditionally busy time of year for mortgages has been muted by funding shortages and, more recently, dampened consumer demand.

"While by historic comparisons we still have had a good level of gross lending, new net lending has been constrained in 2008 and this picture will continue for the rest of this year."

Meanwhile the Bank of England Deputy Governor, John Gieve said the downturn in the British economy still has further to run and recession cannot be ruled out.

In a question and answer session following a speech, Gieve noted that the Bank had not forecast recession as its central projection in its May forecasts but had shown it was a possibility.

Mortgage lending levels are expected to remain low for the foreseeable future, with other indexes reporting depressed figures for mortgage approvals.

Lending is being hit by a double whammy of the downturn in the housing market and the problems in the mortgage market caused by the credit crunch.

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