Mortgage lending has fallen again over the 12 months to October, according to latest figures released from the British Bankers Association (BBA).

The number of mortgages approved for house purchases was down to 21,584 - 52% lower than a year earlier.

Meanwhile net lending for mortgages rose by £2.9 billion last month, compared with £3.5bn in September and the previous six-month average of £3.9bn.

"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," said David Dooks, BBA statistics director.


"Mortgage approvals remained low, consumer credit was subdued and people used their deposits to fund spending in October," he added.

The figures were announced just a day after a warning about the state of the mortgage market, detailed in a report by former HBOS chief executive Sir James Crosby.

He said: "Therefore I believe that new net mortgage lending is likely to fall below zero in 2009, with only a modest recovery likely in 2010."

In the Crosby report - a commentary into mortgage financing - Sir James suggested repayments and redemptions would outstrip lending during the year.

Sir James, is also calling for a temporary guarantee with taxpayers' money of new mortgage-backed securities - the packages of home loans sold on by banks to investors to fund fresh lending.

Melanie Bien, director of mortgage broker Savills Private Finance said she was not surprised by Sir James' prediction.

She said: "It is inevitable but it will be a temporary situation. It is the pain we have to go through to reach the bottom before starting to come back up again."

(JM)