Gross mortgage lending reached an estimated £12.6 billion in December, down 11% from £14.2 billion in November and 47% on December 2008, according to the Council of Mortgage Lenders (CML). This is the lowest monthly figure since April 2001.

Lending totalled £256.4 billion over 2008 as a whole, down 30% on £363.7 billion in 2007 and the lowest annual figure since 2002. Recent mortgage approval figures from the Bank of England indicate lending will decline further in the coming months, so improvements in lending are unlikely to be seen in completion levels until the second half of the year at the earliest.

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Michael Coogan, CML Director General, said: "December is typically a quiet month in the mortgage market, on top of which the market has been constrained by a shortage of funding and reduced demand.

"This week's package of measures to support the financial system and invigorate new lending was an essential and welcome move by government. The next challenge is to settle the detailed requirements for each measure, so that they can be used by as wide a range of market participants as possible, and as soon as possible.

"A mortgage market solely funded by a few large banks and building societies would be unlikely to have the capacity to match future consumer borrowing demand, or be as competitive in the long term as the UK market has been before the credit crunch. Increasing the range of active lenders and funding capacity in the market overall is a vital next step.

"Further measures targeted at the housing market are likely to be needed to supplement the welcome intervention to address liquidity and capital concerns."

(CD/JM)