Mortgage lending 'still subdued'

18 April 2008 12:00am

Mortgage lending remained subdued during March as the market continued to suffer from the fallout of the credit crunch, figures have shown.

Total advances increased by 5% compared with February's figure to £26.3 billion, but the rise was well down on the typical 20% increase usually seen between the two months.

Despite the slight improvement, levels are still 17% lower than they were in March last year, the Council of Mortgage Lenders said.

Lending was also subdued on a quarterly basis, with £77.2 billion advanced during the first three months of the year, 8% less than in 2007.

The group warned that the amount of money advanced looked set to fall further in the coming months.

CML director-general Michael Coogan said: "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."

The credit crunch has taken a heavy toll on the mortgage market as lenders struggle to borrow mortgage financing in the wholesale money markets and the cost of funds has also increased sharply.

The situation has led to lenders repeatedly raising their own rates, tightening their lending criteria and pulling deals which are attracting too much business.

The number of different mortgage products on the market on Thursday fell below the 4,000 mark for the first time since the crisis began.

© The Press Association