The Bank of England has reported that new mortgage lending collapsed in August with just 32,000 new mortgages being approved - 70% fewer than a year ago.
Despite the fact that August is traditionally the quietest month for house sales a lending figure like this is testament to the deep malaise in the UK housing market which is expected to continue into next year.
The continuing fall in house prices and open talk of an imminent recession may have put off potential purchasers combined with the continuing difficulties experienced by first time buyers who have been more-or-less shunned by lenders.
Howard Archer of Global Insight said: "The dire Bank of England mortgage data shows that housing market activity is being decimated by the highly damaging combination of stretched buyer affordability and tight lending practices,"
Several of the biggest lenders have re-written their loan offers with Lloyds TSB pushing up the cost of its two- and three-year fixed rate mortgages, Northern Rock will raising the cost of its entire range of residential fixed and tracker rates and HBOS withdrawing its entire mortgage range and replacing it with more expensive options. To get the best products, borrowers now need a deposit of up to 25%.
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