Britains largest building society, Nationwide, has predicted that total mortgage lending will fall in the region of 30% this year, from £100 billion to £70 billion.

Philip Williamson, chief executive, said: "We expect there to be soft landing with lower levels of economic growth impacting on the housing and lending markets during 2005."

He added: "We think that house prices will rise between 0 and 2% for this year, and that the trend will remain flat for two years."