Gross lending declined to an estimated £30.7 billion in November, down 8% from £33.5 billion in October and 8% from £33.2 billion in November 2006, according to the Council of Mortgage Lenders...

This is the first time that monthly lending levels have dropped below the same month in the previous year since July 2005, and clearly demonstrates the market slowdown has started.

CML director General Michael Coogan commented: "As we had forecast, lending in November dipped below its 2006 equivalent for the first time this year and we expect this trend to continue into 2008. However, while lending will be subdued in coming months we see this as primarily a result of lack of available funding rather than lack of consumer demand.

"We welcome the recent initiative by the Bank of England with other central banks to inject liquidity. This support needs to continue, and be increased, in the coming months."

The CML had already said it expected house price inflation to be 1% in 2008.

Difficult year ahead

Rics has now published its forecast, and it expects prices to be "broadly unchanged" throughout 2008, although it acknowledges they could drop in the first half of the year. However, it believes any price falls will not be "extended in duration", given the Bank of England has already signalled the prospect of further interest rate cuts, and employment remains strong.

"2008 will prove a difficult year for the housing market, but with falls likely in the base rate, the housing market should be provided with a stable platform," said Rics chief economist Simon Rubinsohn.

Rics also predicts that repossessions will rise from 30,000 to 45,000 next year, but says this is still well below the "high water mark" of the early 1990s, when repossessions rose to almost 80,000.

Separately the UK's building societies revealed that they continued to attract high levels of savings last month, taking deposits of more than £2.3bn in November. That was less than the record £3bn deposited in October, but almost three times the amount received in the same month in the previous year.

Encouraging people to save

"In the last three months building societies have received new deposits of roughly the same value as they received in the entire 12 months of 2006," said BSA director general Adrian Coles. "Much of these savings are likely to come from further withdrawals from Northern Rock bank. They also reflect the attractive rates of interest on offer at building societies which are encouraging people to save," he added.

The BSA also urged borrowers who will shortly come to the end of fixed rate mortgage deals to start thinking about the likely increase in their monthly payments. It recommended they talk to their existing lender about their options and review their other financial commitments in the light of potentially higher mortgage costs.