Gross mortgage lending fell to £9.9billion in February, down 15 per cent from January's figures and 60 per cent from February 2008.
According to new data from the Council of Mortgage Lenders, February typically shows lower mortgage
approvals than in other months, but this year, mortgage lending was at its lowest monthly level since February 2001.
The value of home loans fell 15 per cent compared to January, when lending amounted to £11.7billion.
While this is a larger decline that the usual three to four per cent fall expected for February figures, it remains in line with the CML's forecast for 2009 gross mortgage lending of £145billion.
Conditions in the market remain tight and mortgage lenders
are reluctant to approve loans, despite demands from the Government for them to resume lending to homeowners and small businesses.
But, as the recession takes its toll on banks' confidence to lend to each other and the wider market, consumers' confidence in the banks has also been waning, pushing them towards Government guaranteed savings providers like NS&I, consequently draining lenders' deposits and making it difficult for them to lend.
"Retail savings are now the predominant source of funding for mortgages. But banks and building societies have seen savings ebb away to National Savings and Investments, which has a negative impact on their ability to lend," explains CML director general Michael Coogan.
"This is yet another example of fractured policy," he said. "There are now fewer active lenders in the market, but the government wants them to lend more. At the same time, the government's own savings institution is sucking away the funds that would enable them to do so. Until funding improves, the capacity of lenders to lend will remain constrained."
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