Net mortgage lending down 98%
Latest figures from the Bank of England show that mortgage lending in the UK effectively collapsed in August.
Mortgage advances were at their lowest level for six years totalling just £19.19 billion.
However, net lending, which takes into account repayments and redemptions, fell 98% year-on-year to £143 million, the lowest level since the Bank’s records began in 1993.
New mortgage lending plummeted to 2% of the August 2007 figure and represented only 5% of the value advanced in July 2008.
Meanwhile, only 32,000 mortgages for home purchase were approved in August, 70% down on a year earlier.
Commentators attribute the dramatic decline to a shortage of mortgage funds, a lack of confidence in the UK property market, uncertainty about changes in stamp duty (which finally became effective on 1st September) and fears over the economy and job security.
August is a traditionally slow period for housing transactions and September’s figures may be bolstered by the holiday season coming to an end and the one year reprieve on stamp duty for properties costing less than £175,000.
However, in the short-term the outlook is bleak because the deepening of the credit crisis during the past fortnight is forcing mortgage interest rates up.
HSBC, Woolwich, Yorkshire Building Society and Lloyds TSB have all raised rates in the past few days.
Northern Rock is increasing the cost of its residential fixed-rate and tracker loans today.