Mortgage lending at three-year low

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Just £21.8 billion was advanced during the month, 12% less than during July and a 36% drop compared with August last year, according to the Council of Mortgage Lenders.

The group said the figure was the lowest monthly sum lent since April 2005, and the most depressed level for the traditionally busy month of August since 2002.

The CML blamed the slump on the "exceptionally low" housing market turnover, which has seen transactions drop by around 50% compared with last year.

But it said remortgaging activity had also been lower than anticipated, adding that monthly lending figures looked set to remain subdued in the immediate future.

CML director general Michael Coogan said: "These figures reflect the heightened uncertainty for both lenders and consumers in the mortgage market at present.

"Lenders are uncertain about future sources of funding and the cost of funding, while consumers are unsure about how much further and for how long house prices will continue to decline."

Uncertainty in the market was increased this week with the announcement that Halifax Bank of Scotland was being taken over by Lloyds TSB.

HBOS is the UK's biggest mortgage lender, writing around one in five new mortgages during the first six months of the year. The combined group will have a mortgage book that accounts for nearly a third of all outstanding mortgages in the UK.

But Lloyds TSB has not yet said if it will keep the HBOS brands, and it remains to be seen what impact the deal will have on competition in the mortgage market.