According to the Council of Mortgage Lenders (CML), last year proved to be the strongest ever year for gross mortgage lending by reaching an estimated £362bn, which is up 5% from £345bn in 2006.

However, December gross lending declined to an estimated £22.6bn, which was CML’s lowest monthly figure since May 2005. It was down 25% from £29.9bn in November, and 21% from £28.6bn in December 2006. A 6% seasonal fall might typically be expected between November and December.

Michael Coogan, director general of CML, said: “The ‘credit crunch’ moved into its fourth month in December and continued to constrain the cost and availability of funds to lenders and, in turn, the cost and number of mortgage products available to borrowers.

“Looking forward, the recent decline in interbank lending rates and the prospect of further reductions in base rates in 2008 should provide some help to the market, although lending volumes are likely to remain weak for the next few months.”