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Mortgage lending slumped by £600m in October, or 52% on 2007 figures.

According to figures released by the British Bankers Association, mortgage approval figures dropped a massive 52% to 21,584 approvals.

Lending reached £2.9bn in October, down from September’s £3.5bn, and down from October 2007’s £7bn.

Remortgaging figures rose from 51,707 in September to 52,425 in October, while house purchase dropped from 23,383 last month to 21,584 in October.

David Dooks, BBA statistics director says: “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. Mortgage approvals remained low, consumer credit was subdued and people used their deposits to fund spending in October.”

Oliver Gilmartin, senior economist at the Royal Institute of Chartered Surveyors, says: "News that mortgage lending took a turn for the worse comes as little surprise, given the backdrop of rising unemployment and fragile confidence.

“These conditions highlight the difficulties facing first time buyers, particularly where stringent deposit requirements continue to be a major barrier to those wishing to enter the market. Aggressive interest rate cuts by the BoE in recent months and the prospect of more to come before Christmas will take time to filter through into increased house sales.”

To keep up with the latest news and comments on the mortgage market please visit the Mortgage Broker Blog.

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Borrowers’ “nerves have failed on back of endless bad news” which has led to a huge surge in demand for payment protection insurance.

The PPI provider Paymentshield has found that applications for PPI over last three months are up 146% on previous quarter. It says repossession is mortgage borrowers’ biggest fear now.

“Over the past few weeks our phones have been ringing off the hook with enquiries from worried borrowers who want to buy themselves peace of mind in these troubled times,” says Paymentcare.co.uk managing director Shane Craig.

“Every day brings more alarming headlines on redundancy and repossessions and as a result people are seriously worried now,” he adds.

And they are right to worry. Unemployment is expected to rise and no one can say their job is 100% safe. That’s why you need some protection when it comes to your mortgage and your other financial responsibilities. Just think – if you lost your job today could you cover your mortgage until you found another one?

It’s a horrible thought, but one that should not be cast aside. With some professionally advised payment protection, you can be sure that if the worst happens, you are covered in the short-term.

To keep up with the latest news and comments on the mortgage market please visit the Mortgage Broker Blog.

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Massive stimulus efforts to stave off a global recession steadied stock markets on Thursday, but grim outlooks in China and elsewhere indicated the economic crisis still had a long way to run.

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The mortgage industry has begun to see light at the end of the tunnel after chancellor Alistair Darling revealed the Government would help mortgage finance become liquid again.

Darling said in his pre-Budget report that he is to begin the process by which the Government will guarantees for securities backed by new mortgages.

Simply, this means that big packages of mortgages will be given a Government seal of approval so other banks will not be scared to buy them. In better times this was how banks and building societies made most of their money to fund better and more innovative mortgages.

The former chief executive of HBOS, Sir James Crosby, who has spent nine months looking into the mortgage funding industry, put these proposals forward. In his report he said that the Government must do something to make the mortgage funding markets liquid again and allow bank lending to continue.

Darling says: “I share Sir James’s concerns about the availability of mortgage finance.

“To implement Sir James’s recommendation, the Government would need to obtain State Aid approval from the European Commission and resolve some technical and practical considerations.”

The mortgage industry will hope that this scheme will begin in earnest, bringing back much-needed mortgages into the market.

To keep up with the latest news and comments on the mortgage market please visit the Mortgage Broker Blog.

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A steady drift higher in dollar lending rates in Asia revealed that the U.S. government's new plans to support consumers and the mortgage securities market had done little to soothe money markets.