The number of new mortgages approved by the major lenders fell by another 23% in June to a new record low of just over 21,000.
The British Bankers Association (BBA) said the figure was down from 27,499 in May and compares very poorly to nearly 64,000 approvals in June 2007 – a 67% reduction.
The collapse in sales and fall in house prices has been caused by a deep reluctance of lenders to part with their cash, which has been triggered by the credit crunch in the banking system.
The BBA said the number of homes sold in 2008 is likely to be the lowest since the recession in the early 1990s.
The BBA's members account for about two-thirds of mortgage lending but figures for all lenders, to be published next week by the Bank of England, are likely to show the same picture.
Although the Bank of England has cut interest rates since the credit crunch started last year, mortgage lenders have generally been moving their mortgage rates in the opposite direction and the average two-year fixed rate deal for a new borrowers is now just under 7% and nearly all loans are for a maximum of 90%, and several lenders now demand higher deposits, of 15% or even 20%.
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British Bankers Association