Nationwide mortgage advances down 40 per cent

One of the UK's biggest lenders, Nationwide building society, has reported a sharp drop in mortgage lending over the past 12 months – a further sign of the decline in the housing market.

As part of its annual results, Nationwide said new mortgage lending had fallen by 40 per cent in the year to April, compared with the previous 12-month period.

There are two main reasons for this dramatic slide. First, housing market activity has slumped in recent months as prices have gone into reverse. Second, the credit crunch has made lenders much more careful about which mortgage applicants they accept.

Lenders are asking for new borrowers to have a far bigger deposit than in the past and are steering clear of high income multiples.

Graham Beale, the chief executive of Nationwide, said that the credit crunch – with banks struggling to raise the money to fund loans – was "unprecedented" and that he saw no end in sight.

Less able than the banks to borrow on the money markets, Nationwide said it was funding its lending entirely through customer deposits – a total of £9.1bn. But its market share of new mortgage business has shrunk in the past year.