Huge slump in mortgage lending

Net lending was only £143 million during the month, a fraction of July's sum of just under £3 billion and the lowest figure ever recorded by the Bank of England's statistics series which began in 1993.

The Bank did not offer an explanation for the slide, but it is almost certainly caused by the combination of falling house prices putting people off moving and the credit crunch making it hard for potential buyers to raise the mortgage they need.

Speculation over the Government's recent stamp duty announcement is also thought to have caused people to delay making a purchase during August until the future of the tax was clearer.

The Government finally announced at the beginning of September that it was scrapping stamp duty for one year on properties worth up to £175,000.

Total mortgage advances reached just £19.19 billion during August, the lowest figure for six years.

But it was net lending, which strips out repayments and people remortgaging elsewhere, that took the real battering, as potential buyers continued to stay away from the market.

The situation looks set to continue to worsen, with the number of mortgages approved for house purchase sliding to a new record low of 32,000 during the month, although this was slightly ahead of economists' expectations.

The number of people remortgaging also continued to fall, dropping to 64,000 compared with a recent monthly average of 88,000.

The value of all types of mortgage approved in August was only £13.61 billion, less than half of the figure for August last year of £30.17 billion and the lowest for nearly seven years.