With the demise of Bradford & Bingley, hard on the heels of HBOS and not that long after Northern Rock, the specialist mortgage bank is no more. All of them came out of the building-society sector, mixed it with the big boys of banking - and failed. The contrast with the early 1990s, when Britain’s lenders survived a long housing recession pretty much intact, is stark.

What does this mean for property? Over the past year, mortgage feast has turned into famine. As I have pointed out, all eyes have been on whether anything can be done to kick-start the wholesale mortgage markets, getting us not to feast, but away from the starvation diet.

Sir James Crosby’s report for Alistair Darling, the final version of which is now expected later this month, addresses that question. Yet, while the former HBOS chief executive has not been wasting his time, things have moved on. Saving the banking system has taken priority over new mortgage money – the markets have spoken and brought about a period of intense consolidation in the mortgage sector.

What will this mean for housing? To paraphrase Nye Bevan, why look into the crystal ball when you can read the book? The latest figures for mortgage lending, covering August, provide a glimpse into the future. The figures, from the Bank of England, show that monthly approvals hit a new low of 32,000, only slightly down on July’s 33,000 figure, but 70% lower than a year earlier. Most striking is that net mortgage lending was just £143m, compared with £3 billion in July and £9.1 billion in August last year. A spike in mortgage redemptions may have exaggerated the fall, as may the uncertainty over stamp duty. This looks, however, to be the shape of things to come.

We have become used to the level of mortgage debt increasing month by month. In August, however, the amount households owe actually slipped, from £1,217 billion to £1,216 billion – something that did not happen even in the dark days of the early 1990s.

Some in the industry expect the level of outstanding mortgage debt to continue to fall for the next year or so. That will mean weak activity and further price falls. So strapped are the lenders, we will be paying them back more than they lend. A different era.

home.economics@sunday-times.co.uk

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