Reports have shown that October saw a further decrease in mortgage approval levels, falling by nearly two thousand compared to September and plunging by a massive 52 percent compared to October of last year. It is thought that part of the reason behind the fall in mortgage approval levels is that consumers have found other things on which to spend their deposits, particularly with Christmas just around the corner and very little availability of credit for many consumers.

In August mortgage lending levels slipped to a record low, and whilst the figures were healthier for September they have now started to slip again. Consumer credit was also low for the months according to the recently released figures.

The British Banker’s Association released figures that showed the slowdown in mortgage lending levels. It said that mortgage lending from the nation’s High Street banks had slipped by over half a billion between September and October, and was one billion lower than the figure for the previous six month average.

One official from the British Banker’s Association stated: “Comparison of current lending levels with last year is obscured by the very different economic conditions that exist now, reflecting a much reduced appetite for borrowing. Mortgage approvals remained low, consumer credit was subdued, and people used their deposits to fund spending in October.”

Also, referring to the recent package of measures unveiled by the Chancellor of the Exchequer, Alistair Darling, he added: “They must help bolster consumer demand to some extent given that they are putting money back in people’s pockets. Whether that’s enough, only time will tell.”

The package of measured was unveiled after Sir James Crosby, the former chief executive of HBOS who was commissioned by the government to undertake a review into mortgage lending and look at ways to try and revive the market.

Cosby said: “For as long as these pressures remain, most lenders will have no incentive to expand their balance sheets. Unprecedented as such a development would be, there is therefore a possibility that net mortgage lending falls to zero over the next two years.”

His review also stated: “A sustained reduction in mortgage finance on this scale would clearly have wide implications for the market and the UK economy.”

The Crosby review has been long awaited and has made a number of recommendations based on how Crosby feels that the mortgage lending market could be revived. The various measures that have also been announced by Darling include banks agreeing to wait at least three months before taking repossession action in the event that the homeowner falls into arrears with their mortgages.

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