Mortgage lending plunges to 10-year low

Mortgage lending during August dived to a 10-year low for the month as activity in the housing market remained "exceptionally" weak, figures showed today.

A total of £11.4 billion was advanced during the month, 14% down on July's figure and the lowest level for August since 2000, according to the Council of Mortgage Lenders.

The group warned that the market was heading for a "difficult" second half of the year, with lending volumes likely to remain below the level seen during the last months of 2009, when activity was buoyed as the end of the stamp duty holiday approached.

Figures from the Bank of England's Trends In Lending report, also released today, suggested the drop in lending may have been caused by a fall in the number of people remortgaging during the month.

The Bank said data from the major lenders suggested that net lending, which strips out redemptions and repayments, was "little changed" during August.

It added that while gross lending for house purchase was broadly stable during the month, remortgaging activity continued to be weak.

Net lending looks set to remain subdued during September, with lenders reporting a slight fall in the number of mortgages approved for house purchase in August, with these reaching their lowest level since April 2009.

Mortgage rates for new customers fell slightly during August following an increase in competition in the market.

But in its quarterly bulletin, the Bank of England said banks had not been passing on the fall in the base rate in full to borrowers, with the interest rate charged on some loans rising.

It said this was due to the fact that banks currently faced higher borrowing costs themselves, as well as an increased risk of homeowners defaulting on their loan.