New mortgage lending down 36%

Latest figures from the Council of Mortgage Lenders show a continued decline in lending, as house sales hit record low levels.

In August, the value of new home loans advanced totalled £21.8 billion, down 12% on July and 36% on August 2007.

CML director general, Michael Coogan, expects the downward spiral to continue in the months ahead, explaining that lenders are uncertain about the future cost and sources of funding, while consumers are unsure how much further and for how long house prices will decline.

While August is traditionally a quiet month for homemovers, house sales are now down 50% over the year and mortgages approved for transactions not yet completed have fallen by 71%, suggesting that actual sales could plummet further.

Any impact on the market of the suspension of stamp duty for houses worth between £125,000 and £175,000 is likely to be offset by this week’s collapse of US bank investment bank, Lehman Brothers, the rescue of insurer AIG and the merger of Lloyds TSB and HBOS.

All the events have served to make lenders nervous about future funding and in the case of the Lloyds / HBOS merger, heighten general fears over high levels of unemployment.

Analysts are predicting that combining the banks could cost up to 40,000 jobs and further consolidation in the financial services sector is inevitable.

Discuss this in the Finance Markets forums

Story link: New mortgage lending down 36%