Mortgage lending to first-time buyers and existing homeowners fell during the first quarter to its lowest level for more than three decades and is predicted to worsen throughout 2008.

According to the Council of Mortgage Lenders (CML), new home loans from January to March slumped to 142,000, only marginally above a total 140,000 recorded in the first quarter of 1975 and below the 146,000 recorded in early 1992 when Britain was in the grip of recession.

The CML also said today that in March, new home loans for first-time buyers and home owners plunged by 48 per cent compared to the same month last year.

While mortgage lending in March fell by 1 per cent on February, on an annual basis new home loans slumped from 89,000 in March last year to 46,000. Gross mortgage lending in the first quarter fell from £83.9 billion in the same period last year to £75 billion.

The number of mortgages for first-time buyers fell sharply, down 45 per cent in March compared to early 2007 while loans for existing homeowners choosing to move house declined 48 per cent on the same month last year.

The CML's figures tally with a gloomy outlook from the Royal Institution of Chartered Surveyors (RICS) which said surveyors were reporting an average 18.3 property sales per month, down from 22.2 in March and the worst since the record low set in November 1992.

Michael Coogan, CML director general, said: “House purchase transaction volumes will continue to deteriorate in the coming months as recent approvals data from the Bank of England has shown.

“Since the introduction of the Special Liquidity Scheme, there has been a slight improvement in credit market conditions with libor moving in a more helpful direction. But libor still remains high relative to the Bank rate and any improvement in credit market conditions will take time to feed through into the mortgage market."

In contrast, the CML said remortgaging in March was "relatively resilient", rising to £33.3 billion which accounts for 44 per cent of gross mortgage lending during the first three months of the year, up from a 33 per cent contribution to gross lending in the fourth quarter of 2007.

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