The number of mortgages taken out by home buyers fell by 19 per cent in January to a new low. Figures released today by the Council of Mortgage Lenders show that 50,300 buyers were granted a home loan in January, 34 per cent lower than January last year, and the lowest figure recorded since CML began collecting monthly information in 2002.

The gloomy figures came as surveyors indicated that the housing market experienced its most severe downturn since the housing market slump of the 1990s last month.

The balance of surveyors reporting falls rather than a rise in house prices soared to 64.1 per cent last month, up from 54.8 per cent in January. In June 1990, the balance was 64.5 per cent. The only exeption to this trend was Scotland, where 25 per cent more surveyors reported price rises than falls.

Michael Saunders at Citigroup, said: “This is very soft indeed, reflecting the interplay between stretched valuations, tightening lending standards and widening lending spreads. The further adverse effects of rising repossessions, weakening job growth and then probably a rise in unemployment still lie ahead.”

Government house price figures were more upbeat however, showing that the average house price rose by 1.7 per cent in January, to £221,758.The price rise was driven by a 4.3 per cent increase in the average value of a detached property, while the cost of flats and bungalows rose by 1.3 per cent and 1.1 per cent.

However, the annual rate of inflation fell to a 16-year low of 8 per cent. This was still higher than the rate calculated by Halifax, which says house price inflation is currently at 4.5 per cent and Nationwide, which says inflation is at 4.2 per cent, the lowest level it has recorded since December 2005.

Economists said that the Government figures were more weighted towards London prices, where expensive houses are still selling well, as it was based on the price of housing market stock sold. Halifax and Nationwide base their figures on the volume of property sold. The Government figures are based on actual mortgage completions, which makes them lag behind the other indices slightly.

House prices have soared by 182 per cent over the past decade – almost trebling from £70,000 at the end of 1997 to an average £197,244 in January. But prices are now beginning to slide.

While this would usually be good news for first-time buyers, tighter lending conditions imposed by mortgage lenders as they strive to protect their margins in the wake of the credit crunch are having a big impact.

New figures from the Bank of England show that while mortgage rates have fallen for those with 25 per cent deposits, home loans rates for those borrowing 95 per cent of the value of their home have risen by 0.13 percentage points despite the base rate cut last month.

Michael Coogan, director general of the CML said: "The wholesale funding markets remain largely closed and mortgage funding still remains constrained. This is now having a discernable impact on lending criteria and the ability of first-time buyers to get into the housing market."

The number of re-mortgages surged however, as homeowners come to the end of their fixed-rate deals. Around 1.4 million people are due to end their fixed-deals this year. The CML said that many of these borrowers were switching from fixed rates to tracker rates. Some 57 per cent of loans taken out in January were fixed-rate deals, down from 77 per cent in June last year.

The CML was dismissive of Government proposals to boost the credit markets by introducing a "kitemark" for the best mortgage-backed assets - a scheme which is likely to be mentioned in tomorrow's budget.

Mr Coogan said: "We are unconvinced that a new kitemark “gold standard” for mortgage securities is the solution, or that consumers will move to longer term fixed-rate mortgages without financial incentives. We await with interest the outcome of the Treasury’s Housing Finance Review due to be announced in the Budget.”

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