High-street mortgage lending fell 60% to £2.8bn
The value of loans for house purchases has now fallen 77% from its peak at the end of 2006, according to the British Bankers' Association (BBA).
Figures for October show that just £2.8bn worth of loans for home purchases were advanced by the major high-street banks, almost 60% down on the same month in the previous year.
However, a spokesman for the BBA said the fall was even more dramatic from the lending peak in November 2006, when £11.96bn of loans were made. The BBA also said that the number of loans for house purchase had fallen sharply, with just 21,584 loans made in October this year, compared with 78,593 at the peak of the boom.
The BBA also said that loan values had fallen from September, down 9.7% from £3.1bn, despite the Bank of England dropping base rates by 0.5% that month and the government raising the stamp duty threshold.
David Dooks, BBA statistics director, said: “Comparison of current lending levels with last year is obscured by the very different economic conditions that exist now, reflecting a much reduced appetite for borrowing. Mortgage approvals remained low, consumer credit was subdued and people used their deposits to fund spending in October."
The news follows the admission by Sir James Crosby yesterday that net mortgage lending could fall to zero next year, as predicted by Building earlier this month. Chancellor Alistair Darling said he would look at measures proposed by Sir James to increase banks' appetite for mortgage lending by giving government guarantees to loans on house purchases.