Mortgage lending falls from £4.8bn to £2.1bn

Published on Tuesday 23 September 2008 22:10

MORTGAGE lending halved during August and the number of loans approved for house purchase slumped to a new record low.

Net mortgage lending, which strips out redemptions and repayments, dived to just 2.1 billion during the month, less than half of July's 4.8 billion, and the lowest level since February 2001.

The British Bankers' Association blamed the slump on the combination of falling house prices, the current economic problems and lenders' tighter lending criteria as a result of the credit crunch. But the group added that speculation that the government was going to make an announcement on stamp duty also curbed demand during August as people delayed buying a house in the hope that they would not have to pay the tax.

Chancellor Alistair Darling finally announced in the first week of September that stamp duty would be suspended on properties costing up to 175,000 for a year.

The National Association of Estate Agents yesterday blamed speculation over the future of the tax for a further drop in sales in August.

The number of mortgages approved for house purchase continued its downward spiral during August, dropping to a new record low of 21,086, 5 per cent less than in July and 64 per cent fewer than in the same month of 2007, the BBA said.