The news on housing-market activity keeps coming and it keeps surprising with its unprecedented weakness. Figures released by the British Bankers’ Association (BBA) last week showed that just 27,968 new mortgages were approved in May, worth £4.3 billion. That was a drop of nearly 20% compared with April, which itself was weak, and a fall of more than 56% compared with May 2007, in those heady days before the credit crunch.

The BBA’s numbers do not cover the whole market, but it is a fair bet that when we do get those statistics from the Bank of England, they will show that overall mortgage approvals have again dropped to a new low. The pattern of recent months is continuing: while the number of new mortgages is dropping like a stone, remortgaging is holding up well.

How does this compare with past downturns in the housing market? In the early 1990s, mortgage approvals dropped by 57%, but took four years to do so, from 1988 to 1992. The credit crunch’s impact on new lending has been much swifter and more savage than the effects of high interest rates on their own were then.

At that time, incidentally, there was relatively little remortgaging. People took out a loan to buy their home and tended to stick with it. The number of remortgages was perhaps 20% of the number of new mortgages, often less. These days, remortgages are at twice the level of new loans. To the extent that remortgaging keeps the lenders in business, they do not need to bust a gut for borrowers new to the market, which means first-time buyers suffer.

As the lending numbers plunge, the sounds of desperation from estate agents are getting louder. It is not often that they celebrate falling house prices, but that is precisely what Rightmove did a few days ago, praising the fact that sellers cut their asking prices by 1.2% this month.

Miles Shipside, Rightmove’s commercial director, believes they need to go a lot further. “Lenders are trying not to lend right now, and are cherry-picking for profit,” he said. “With approximately half the mortgage funds available, homes have to stand out to attract the half of buyers that can still buy. For most sellers, that will mean taking at least 10% off whatever they thought of asking for their home at the peak of the boom. Otherwise, their property will stagnate.”

How do estate agents keep going during this slump in activity? Charles Peerless, of Winkworth, points out that agents with good letting businesses are benefiting from the strong rental market. The weakness of sales is to a significant extent being mirrored by the strength of lettings, one reason most landlords are hanging in. In addition, because estate-agency staff rely on commission, many are quietly voting with their feet and seeking another line of work. Have a look in any agent’s window and you’ll see fewer staff there. That is likely to be the case for quite some time to come. home.economics@sunday-times.co.uk

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