The Council of Mortgage Lenders has warned that the mortgage market will not return to normal lending levels for the foreseeable future.
It revealed last week that mortgage approvals have dropped by around 50% since 2007. There were 518,800 mortgages approved in 2009, compared with 1.01 million in 2007.
In its latest issue of News & Views the CML says the contraction in mortgage lending since 2007 has been the most severe on record.
In both 2008 and 2009, fewer than 520,000 loans for house purchase were granted – lower than in any year since 1974.
The trade body adds that based on data to date, it expects to see lending for house purchase in 2010 running at levels similar to those seen in 2008 and 2009.
In 2009, gross lending for house purchase totalled £70bn, 55% below the 2007 figure of £155bn. Over the same period, net mortgage lending fell from £108bn to £12bn.
The CML believes the contraction in lending has been driven by a reduction in the availability of credit, while previous downturns in the 1980s and 1990s were caused by a fall in demand for credit in the face of economic uncertainty and high interest rates.
Meanwhile, the National Association of Estate Agents believes the housing market recovery is being threatened by self-serving and stubborn lenders.
Peter Bolton King, chief executive of the NAEA, says: “The housing market is in a state of fragile recovery. This is threatened by the stubborn refusal of lenders to loosen their self-serving restrictions on lending.”