Mortgage lenders in the United Kingdom expect the number of new home loans to drop within the next three months, said the Bank of England.
The expected decline in mortgage applications will raise fears that a second credit crunch could probably emerge, with many banks and lending institutions worried that they may not have enough money to lend due to the banks unwillingness to lend to each other.
The report from the Bank of England said that “wholesale funding market conditions might tighten” in the next three months. This comes at an unusual time for the UK mortgage market, which is still struggling to recover from the global economic crisis.
The number of successful mortgage applications declined to 50,000 in May from 100,000 applications received every month prior to the credit crunch in 2007.
The number of mortgage products has also dropped to 2,600 today, compared with 12,000 available products before the 2007 crisis, according to finance company Moneyfacts.