According to the bank’s preliminary results, its total mortgage lending for the 2007/2008 tax year stood at £6.7billion, down from £11.2billion the year before. The results are in line with a decline in mortgage lending from the majority of high street lenders during the credit crisis.

Until yesterday, inter-bank lending was frozen, which had impacted on the mortgage market as banks had risked too much on US sub-prime mortgage lending and, consequently, became reluctant to lend to anyone who was without a considerable deposit or blemish-free credit report.

However, the mortgage market is expected to ease slightly in coming months as banks have begun to lend to each other again. HBOS did so for the first time since last July yesterday when it sold £500million worth of mortgage backed bonds as a result of investor’s enquiries.

If the trend does continue, then Nationwide mortgage lending could eventually recover, but statistics show that the 40 per cent drop is the average across the board. The Bank of England launched its Special Liquidity Scheme last month in attempts to secure the future of mortgage lending, but several bodies argue that the £50billion injection is not sufficient.

However, Nationwide’s chief executive, Graham Beale, supports the Banks Scheme, saying: “We welcome the Bank of England’s recent initiative with the Special Liquidity Scheme and continue to work with the regulatory authorities in their efforts to deliver liquidity support to the markets. This should ease increased funding costs and contribute towards the recovery of more normal market conditions.

“Whilst the environment will remain challenging, the market now has a much more transparent and realistic view of the cost of risk.” Mr Beale added.

If Nationwide’s results reflect the nervousness felt on the housing market so too do the falling share prices of RBS, previously the third largest bank in the UK. The fall in share prices yesterday pushed the bank down in the rankings to fourth. Just last month the bank issued a record breaking rights issue of £12billion, sparking fears amongst shareholders of the bank’s security.

©Fair Investment Company Ltd