BRITAIN faced more signs of the stranglehold the credit crunch is having on the economy as levels of mortgage lending fall sharply amid warnings of a recession.
Banks and building societies advanced £23.8bn for mortgages during June, the lowest level for more than two years, the Council of Mortgage Lenders (CML) said.
The decline is accelerating and is now 32 per cent lower than the advances made in June
2007.
The news came as the Bank of England deputy governor Sir John Gieve said a recession could not be ruled out and the Government considered reviewing rules on how much it borrows as the economic slowdown squeezes Treasury Revenues.
Adding to the gloomy economic picture was a report that gas prices are set to soar.
The independent report commissioned by Centrica, which owns British Gas, warns prices could increase by 70 per cent.
Jake Ulrich, managing director of Centrica Energy, warned the era of cheap energy was over for Western consumers and prices were likely to remain high in the future.
The level of mortgage lending last month was the lowest for June since 2003.
The CML also said the year-on-year decline was gathering pace, with lending volumes during the second quarter 21 per cent lower than during the same period of the previous year, while during the first quarter they had been only 11 per cent down.
CML director general Michael Coogan said: "Market activity during a traditionally busy time of year for mortgages has been muted by funding shortages and, more recently, dampened consumer demand.
"While by historic comparisons we still have had a good level of gross lending, new net lending has been constrained in 2008 and this picture will continue for the rest of this year."
Lending levels are expected to remain low, with other indexes showing mortgage falls.
Mortgage lending is being hit by the downturn in the housing market and the problems caused by the credit crunch.
One piece of good news was that the UK's biggest lender, Halifax, said it was reducing its two-year fixed rate mortgages by 0.1 per cent and its five-year fixed rate ones by 0.15 per cent.
The group, which had already cut rates on Friday last week, said it was keeping its pricing in line with competitors.
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