Mortgage lending dived by nearly 70% in October as the credit crunch
continued to stifle the market, figures showed today.

Net lending, which strips out redemptions and repayments, reached just
GBP459 million during the month, the second lowest figure recorded by the
Bank of England since it began to collect data in this format in 1993.

The steep slide was blamed on the ongoing problems in the mortgage
market as a result of the credit crunch.

The low level of lending, which compared with a sum of GBP1.49 billion in
September, was also thought to have been exacerbated by lenders
tightening their criteria again in the wake of the renewed market
volatility caused by the collapse of Lehman Brothers.

But on a brighter note, the Bank of England figures showed that the
number of mortgages approved for house purchase has remained stable for
the past four months.

Around 32,000 new loans were approved for people buying a property, only
slightly down on September’s figure of 33,000, suggesting the market may
have bottomed out at a very low level.

The lending figures came as data from property intelligence group
Hometrack showed that house prices in England and Wales dropped by 1.1%
during November.

But the group said there were signs that sales volumes may be close to
their floor, with the market now consisting of a relatively small number
of committed buyers able to access finance, and needs-based sellers who
were pricing their homes more realistically.

However, Ed Stansfield, property economist at Capital Economics, said:
“It is hard to see a recovery in the housing market gaining traction any
time soon. Indeed, as the economic downturn gathers pace, 2009 may well be
an even tougher year for the housing market than 2008.Activity levels will remain close to rock-bottom levels for several months yet and house prices will fall markedly further.”

The Bank of England figures also showed an increase in unsecured
borrowing, with lending through credit cards, overdrafts and loans
rising by GBP844 million in October, up from the previous month’s very
weak increase of GBP345 million. But the figure was still slightly below the recent
six-month average, and less than half the GBP1.79 billion borrowed in October 2007.

Meanwhile, research carried out by PricewaterhouseCoopers showed that UK
households have now collectively borrowed GBP1.5 trillion, with the
average working-age adult owing GBP40,000, more than double the level in
2000.

It said that while growth in secured borrowing had fallen dramatically,
unsecured lending was continuing to increase at a rate of 6% a year.

Around 27% of people said they were concerned about their ability to
repay their debt in future, while 16% admitted they were already
struggling.

The group said that during every working hour more than 100 people
entered into either bankruptcy, an Individual Voluntary Arrangement or a
Debt Management Plan.

At the same time it said financial institutions were also increasingly
applying to the courts for charging orders, which convert unsecured
lending which is in default into secured debt.

It said charging orders increased by 45% during 2007 to 97,000, with
banks currently applying for more than 500 charging orders against
borrowers’ properties every working day.