Gloom in the British housing market, where data showed confidence at a record low on Tuesday, is not expected to lift in the short term, as it will take time for the government's plan to bail out banks to feed through.
Council of Mortgage Lenders data for August showed new lending dropped 63 percent year-on-year to 6 billion pounds ($10.6 billion), with the number of new mortgages falling 60 percent to 42,200.
"The package of measures announced yesterday will have a positive effect, but it will take time for it to feed through to the mortgage market," CML director general Michael Coogan said.
When unveiling the planned government bailout on Monday, Britain's finance minister Alistair Darling said: "The availability of lending to homeowners and small businesses will be maintained to at least 2007 levels."
Royal Bank of Scotland, HBOS and Lloyds TSB will receive 37 billion pounds in cash injections, making the state potentially their largest shareholder.
A CML spokeswoman said: "We would be very surprised to see the lending in the same volume terms as 2007," and mortgage lending would likely not pick up markedly until the first quarter of next year.
But the banks may struggle to bolster the mortgage market in a period of deep risk aversion.
Extra liquidity from the government would be important, but creditworthiness, demand and market context are equally important factors for mortgage lending volumes, the CML said.
Lenders may be left in an impossible situation, Louise Cuming, head of mortgages at Moneysupermarket.com, told Reuters.
"I'm intrigued as to how the industry will respond. We don't want to go back to days where credit was so readily available irrespective of the risk."
Northern Rock, the bank that failed when the credit crisis struck and was subsequently nationalised, used to offer mortgages of 125 percent of the value of a house.
Exane BNP Paribas banking analyst Ian Gordon said: "What it (government bailout) is not going to do is lead to greater availability of high loan-to-value mortgages."
Separately on Tuesday, the Royal Institution of Chartered Surveyors said the average number of transactions per surveyor over the last three months dropped to 11.5, the lowest level since its survey began in 1979.
OUTCOME
The priority for part-nationalised banks will be to pay back the government, rather than pay dividends to investors or woo customers.
"There's a lot more concentration on profitability than the consumer benefit," said Cuming.
Northern Rock said it would pass on to borrowers just 0.15 percentage point of last week's 0.5 point Bank of England rate cut.
Part of the reason is that the London interbank offered rate (Libor), the key rate at which banks lend to each other, remains well above the Bank of England's 4.5 percent rate.
The government's action will be an essential part in stimulating the interbank lending market, said the British Bankers' Association.
David Buik at brokerage BGC Partners said: "When the government actually passes the money over, then it's reasonable to expect some softening of Libor. All we've had to date is some wonderful ideas; pithy, reassuring, and in the same breath meaningless, until talk is translated into deed."
