Mortgage lending has fallen to an estimated £23.8 billion during June, the lowest level since February 2006, the Council of Mortgage Lenders said.

The figure was also 3 per cent lower than the amount lent in May and 32 per cent down on advances in June 2007.

More significantly, the total was the lowest figure for June, which is traditionally one of the busiest months for the housing market, since 2003.

The decline between the first and second quarter was a marginal 1 per cent.

However, an increase would typically be expected in spring.

It said the year-on-year decline was also gathering pace, with lending volumes during the second quarter 21 per cent lower than during the corresponding period of the previous year, while during the first quarter they had been just 11 per cent down.

CML director general Michael Coogan said:
"Market activity during a traditionally a busy time of year for mortgages has been muted by funding shortages and, more recently, dampened consumer demand.

"While by historic comparisons we still have had a good level of gross lending, new net lending has been constrained in 2008 and this picture will continue for the rest of this year.

He added:

"Government efforts to help housing associations purchase new-build properties and borrowers to save for a deposit are welcome, but are likely to have only a marginal impact on the housing market. The recent reduction in short-term fixed-rate mortgage costs is a small bit of welcome news for hard-pressed households facing significant pressures on their finances from the higher cost of food and fuel, in particular.

"However, borrowers on tight budgets will have to plan ahead to manage higher mortgage payments than they have been used to. Speak to your lender early remains the advice for anyone struggling to pay."