Gross lending for mortgages declined seven per cent in February to £24 billion from £25.9 billion in January, according to the Council of Mortgage Lenders.
The CML also found that this is a six per cent decrease when compared to February 2007 figures of £25.6 billion.
As a result of the credit crisis, people's budgets are stretched and mortgage
lending criteria has tightened as providers struggle to secure the necessary financing in the broader money markets, and attempt to ward off risky sub prime borrowing by raising their rates – all contributing to the decline in home loans.
The current levels are thought to be supported by a sharp rise in remortgage
approvals, despite subdued levels of house purchase, according to figures from the Bank of England.
Michael Coogan, director general at CML, said that the UK has "entered a substantially slower phase in the housing market" and that unless the Bank of England makes "new, broader based attempts to improve levels of liquidity" the problems in the mortgage funding market will be "ongoing."
"Demand for mortgages remains strong but cannot be fully met from existing funding." he continued. "This has led many lenders to reduce their product ranges, increase their mortgage prices and, in some cases, to reduce their lending capacity.
"As credit conditions change markedly from day to day, lenders will continue to rapidly adapt their products and pricing to match. This is a vital response to the uncertain conditions."
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