Conditions in the UK housing market will "get worse before they get better", with mortgage lending expected to fall by 21 per cent this year while house prices will decline by 7 per cent.

According to revised figures released by the Council of Mortgage Lenders (CML) house prices will fall by 7 per cent in 2008, in contrast to its previous expectations of a 1 per cent rise.

Today's figures also reveal gross mortgage lending had been expected to total £340 billion this year but is now forecast to reach £285 billion in 2008. Over the same period, the number of house sales are predicted to fall from one million to 770,000.

Michael Coogan, director general at the CML, said: "Over the next few months, lending volumes will get worse before they get better.

"The market is still very uncertain, but lenders are working hard to ensure that borrowers coming off fixed rates remain on track, that arrears and repossessions are minimised, and that pricing is as attractive as they can make it in a market where they must manage the demand for lending with caution.”

Howard Archer, chief UK and European economist at Global Insight, is also forecasting that house prices will decline by 7 per cent this year and by 9 per cent in 2009.

Though he admitted: "...it is looking ever more possible that house prices will suffer double-digit falls both this year and in 2009, given serious buyer affordability constraints, limited and often more expensive mortgages available due to ongoing very tight lending conditions, a deteriorating economic outlook and reduced prospects for further interest rate cuts in the near term at least.

Gross mortgage lending in April showed an improvement on the previous month, rising 5 per cent to an estimated £25.3 billion compared to March. However, compared to April last year, gross lending fell by 8 per cent.

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