Fears are growing that mortgage lending will plummet even further in the next few months, as lenders look to batten down the hatches and increase rates.
The Bank of England’s latest mortgage approval figures show lending fell 12% in February.
The total number of approvals declined from 108,767 in January at a value of £13.1bn, to 95,976 in February, worth 11.7bn.
Loans for house purchase fell the hardest, from 57,899 worth £8.7bn in January to 48,986 worth £7.1bn in February.
Dominic Hennessy, director of Just Us Mortgages, says the end of the Stamp Duty holiday could explain the drastic fall in house purchases.
But he adds: “The figures also reflect a serious drop in confidence among high street lenders that have taken their foot off the pedal since February.
“As a mortgage broker, it feels like we’ve been whisked back to the dark days of 2008. There’s every reason to expect a further drop in lending during the next few months.”
David Whittaker, managing director of Mortgages for Business, says lenders have to absorb increasing funding costs imposed by the wholesale markets.
He says: “They can only sponge up so much. It’s likely more lenders will have to follow the lead of the Royal Bank of Scotland and Halifax in increasing rates to cover these costs.”
Meanwhile, Paul Diggle, property economist at Capital Economics, says: “Demand for mortgages rose at the fastest rate for two years in Q1 and lenders reported that the overall supply was unchanged.
“But a majority reported that credit scoring criteria were tightened and that the share of applications being turned down had gone up. Most lenders expect the upward pressure on mortgage rates to be maintained and anticipate reducing the availability of products in the next three months.”