Credit crunch results in low lending levels

A recent report from the Council of Mortgage Lenders has shown that the global credit crunch has had a profound adverse effect on mortgage lending levels in the UK, with figures showing a 17% year on year drop in mortgage lending levels.

In March the amount that was lent out for mortgages came to £26.3 billion, which was over £5 billion less than a year earlier.

The CML stated: ‘Lending on completed transactions is currently running at levels considerably lower than a year ago. However, the picture for mortgage approvals for new business and prospective lending levels in the next few months is worsening. We await the eagerly anticipated announcement of further action by the Bank of England to respond to these rapidly worsening market conditions.’

It added: ‘Early action is needed if we are to be able to maintain a market in which UK borrowers continue to be able to access mortgage funds at reasonable prices. As mortgage costs increase, it remains important for any borrower with potential financial difficulties to speak to their lender as soon as possible, and preferably before they have missed a payment.’

One economist said: ‘The low level of mortgage activity is not only a consequence of slowing demand for houses due to the elevated affordability pressures facing potential house buyers, but also increasingly due to very tight credit conditions leading to markedly fewer and more expensive mortgages being available.’