Mortgage market buckles in August

By Christina Fincher and David Clarke

LONDON (Reuters) - Mortgage lending barely rose at all in August, with the increase shrivelling to two percent of what it went up by a year ago.

Other Bank of England data on Monday also showed fewer home loans were approved last month than at any time since records began a decade ago.

The figures highlight the extent to which the credit crunch has sucked the lifeblood out of the housing market where property prices are falling at their fastest pace in more than 25 years.

Mortgage lending rose by just 143 million pounds last month, a mere two percent of what was advanced in August 2007 and the weakest growth since the series began in April 1993.

Analysts speculated net lending could even turn negative before long.

"It's quite possible that given current market conditions that the stockpile of mortgages actually falls back given the continued strains created by the credit crunch," said Philip Shaw, chief economist at Investec.

Mortgage approvals for house purchase, a key forward-looking indicator of housing demand, fell for a 13th consecutive month to 32,000, less than a third of the total this time last year.

WORSE TO COME?