UK lenders issued less than 10,000 mortgages in February; down 15 percent from the previous month and 60 percent from February 2008.
Michael Coogan, CML director general, had a few wry comments to make about the collapse in mortgage lending:
"Retail savings are now the predominant source of funding for mortgages. But banks and building societies have seen savings ebb away to National Savings and Investments, which has a negative impact on their ability to lend.
This is yet another example of fractured policy. There are now fewer active lenders in the market, but the government wants them to lend more. At the same time, the government's own savings institution is sucking away the funds that would enable them to do so. Until funding improves, the capacity of lenders to lend will remain constrained."
Mortgage lenders are caught in a vicious trap. Near zero interest rates discourages retail deposits, which restricts the availability of new funding for mortgages.
The lack of mortgages pushes down demand, and compresses property prices. The property crash reduces the collateral value of existing mortgages, and weakens bank balance sheets. The wholesale funding market cannot recover because the banking system teeters on the edge of insolvency.
At the same time, the government deficit is increasing, sucking up financing which could, potentially, be used to increase mortgage lending. As Mr Coogan rightly says, government policy is fractured. It is also incoherent, shortsighted, and counterproductive.