The Council of Mortgage Lenders (CML) has reported that UK gross mortgage lending has fallen six per cent during August - sinking to ?32.2 billion from a record ?34.25 billion in July - prompting fresh fears that the housing boom is over. Only a month ago analysts were pointing to the record level of mortgage advances, bullish at the fact that five interest rate rises had not dampened the market. But in only a month that appears to have been turned on its head.

The recently released figures represent a three per cent fall on lending for the same period in 2006 and even more worrying for the banks, building societies and other lenders, is that this drop in lending took place before recent credit restrictions were imposed on mortgage lending resulting from the knock-on effect of the sub-prime market failure in the USA.

With perhaps predictable bravado, the director general of the CML, Michael Coogan rejected claims that the market was anywhere near a dramatic slowdown, commenting: ?Lending fell slightly during August but was still at very high levels. We see no obvious decline in consumer demand, although in the short term we are seeing a decrease in the supply of lending due to the problems lenders are experiencing in raising wholesale funding.?

The CML point to the overwhelming support of the economy from the chancellor, the Bank of England's declaration that it would support three-month funding and the US Federal Bank rate cuts that will increase liquidity amongst lenders. However, caution is still urged as providers of UK mortgages are reminded to factor in interest levels on mortgages similar to those that exist now, if they are to avoid problems in the future.

As a result of the tightening of lending criteria, now more than ever potential borrowers are being urged to carefully before committing themselves to a particular deal. Anyone in such a situation will find that rates have risen sharply and even the amount they may be able to borrow has significantly reduced compared to several months ago, as lenders move to protect themselves against potential bad-debt.

The ogre of negative equity and the close shave for the Northern Rock building society are causing some jitters in the financial world with lenders doing all they can to ensure that they can protect their assets. The CML's claim that there is nothing to worry about will be tested over the coming months as more borrowers struggle to keep up with increased payments and the dust from the sub-prime mortgage market collapse in the USA settles.