The number of mortgages approved for people buying a home has dived by more than a third during the past year, figures showed today.
Just 43,870 home loans were approved for people buying a property during February as a combination of the subdued housing market and the credit crunch put people off moving.
At the same time, the value of mortgages approved for home movers fell to £7 billion during the month, 30% lower than in February last year and down on the recent six-month average of £7.4 billion, according to the British Bankers' Association.
But figures for people remortgaging held up during the month as homeowners looked for new deals after coming to the end of short-term fixed rate loans.
Just over 72,000 home loans for people remortgaging were approved during the month, which, while being down on January's figure, was 5.5 per cent higher than in February last year and well up on the recent six month average of 65,202.
The figure was also the second highest since November 2006, after January's exceptionally strong numbers.
January's remortgaging activity helped to support total advances of £17.9 billion in February, which, while being down on January's figure, was still ahead of the recent six month average.
Net lending, which strips out redemptions and repayments, rose to £5.6 billion during the month, its highest level since September last year.
David Dooks, BBA director of statistics, said: "In an environment of tightening lending criteria, remortgaging, either to fix, re-fix, or reduce borrowing costs, has been a clear influence on mortgage data in the first two months of this year, resulting in mainstream lenders picking up market share."
The figures come as the mortgage market continues to change on a daily basis with lenders tightening their lending criteria as they struggle to borrow money due to the credit crunch.
Financial information group Moneyfacts.co.uk said earlier this week that the number of different mortgage deals available has dived by nearly two-thirds since the credit crunch first hit last summer to just over 5,700, with 2,026 residential and buy-to-let loans pulled during the past month alone.
Howard Archer, chief UK and European economist at Global Insight, said: "The modest rise in February mortgage approvals reported by the BBA does little to dilute the impression that the housing market was already under major pressure from the dangerous combination of stretched affordability and tighter lending practices even before the recent escalation of the credit crunch.
"This has led to a further substantial reduction in the number of mortgages available and an increase in many of their costs."Reuse content