Page last updated at 10:38 GMT, Thursday, 18 September 2008 11:38 UK

Mortgage lending slumps in August

For Sale signs
Sales and prices are still dropping

Mortgage lending continued its downward spiral in August, according to the latest figures from the Council of Mortgage Lenders (CML).

The total value of new lending was 21.8bn, down by 12% from July and 36% lower than in August last year.

The CML said it was the lowest monthly figure since April 2005 and the lowest August figure since 2002.

It blamed the continued fall in mortgage lending on "exceptionally low housing market turnover."

The CML's director general, Michael Coogan, warned that lending would remain low in the months ahead.

In some areas, you could count the number of property transactions in August on one hand
Andrew Montlake, Cobalt Capital mortgage brokers

"These figures reflect the heightened uncertainty for both lenders and consumers in the mortgage market at present," he said.

"Lenders are uncertain about future sources of funding and the cost of funding, while consumers are unsure about how much further and for how long house prices will continue to decline."

Gloomy prospects

There seems little doubt that sales and prices will fall further in the next few months.

Sales are already down by a half over the past year, while mortgages approved but not yet lent have fallen by 71% on the levels of a year ago.

This suggests that actual sales may soon drop even more.

Andrew Montlake, of mortgage brokers Cobalt Capital, said the latest CML figures were grim, but not surprising.

"They are a reflection of the near standstill the property market now finds itself in," he said.

"In some areas, you could count the number of property transactions in August on one hand.

"And although August is always a fairly quiet month, it could be a few months before things start to pick up given the events of the past few days," he added.

All surveys of house prices now suggest that on average they are lower than they were a year ago, with the most widely followed surveys published by the Nationwide and Halifax both showing a drop in prices of 11% during the past 12 months.

The latest crises in the financial markets, and the sudden takeover of the Halifax bank - the UK's biggest mortgage lender - may make more people less confident about borrowing, which could extend the current sharp downturn in the property market.

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