Mortgage lending dived by 30 per cent during 2008 to hit a six-year low as the credit crunch strangled the market, figures showed today.
A total of £256.4 billion was advanced during the year, the lowest annual figure since 2002 and down from £363.7 billion in 2007, the Council of Mortgage Lenders said.
Lending levels continued to fall in December, with just £12.6 billion advanced during the month, the lowest monthly figure since April 2001.
Advances during December were 11 per cent lower than in November and 47 per cent below the figure for December 2007.
The CML said December was typically a quiet month, but added that the market had been constrained by a shortage of funding and reduced demand.
It warned that recent mortgage approval figures from the Bank of England suggested lending levels would fall further in the coming months, with improvements in the market unlikely to be seen in completion levels until the second half of the year at the earliest.
The group said the package of measures announced by the Government on Monday to support the banking sector and boost lending was "essential and welcome".
It said the next challenge was to settle the details of the schemes so that they could be used by as wide a range of market participants as possible, as soon as possible.
CML director general Michael Coogan said: "A mortgage market solely funded by a few large banks and building societies would be unlikely to have the capacity to match future consumer borrowing demand, or be as competitive in the long term as the UK market has been before the credit crunch.
"Increasing the range of active lenders and funding capacity in the market overall is a vital next step.
"Further measures targeted at the housing market are likely to be needed to supplement yesterday's welcome intervention to address liquidity and capital concerns."
The news came as it was revealed that Bank of England policymakers voted 8-1 in favour of cutting interest rates to a record low of 1.5% earlier this month.
However, minutes from the Bank's Monetary Policy Committee (MPC) meeting showed members discussed the arguments for leaving rates unchanged.
They eventually opted for a 0.5 per cent reduction amid fears that their failure to act could damage confidence further in financial markets and the wider economy.
One member, David Blanchflower, called for a percentage point cut to 1 per cent and said it was "becoming increasingly probable" that there would be a deep and prolonged recession.Reuse content