The number of loans made for home purchases declined 22 per cent in December from the previous month, with funding constraints and the rollout of the home information packs (Hips) cited as possible factors.

Loans for house purchases numbered 62,000 in December, down from 78,000 in November, which could be attributed to the effect of the government’s Hips scheme and a more cautious attitude from lenders, according to the Council of Mortgage Lenders (CML).

For the whole of 2007, the number of loans fell by nearly ten per cent when compared to 2006, down to one million loans – while the value eased by two per cent to £155 billion.

CML director general Michael Coogan said: “The decline in lending appears to be driven more by funding constraints than lower consumer demand.”

Affordability for first-time-buyers worsened through 2007. By December, first-time buyers typically contributed 20.7 per cent of their income towards mortgage interest, compared with 17.9 per cent in December 2006.

Mr Coogan said: “Affordability has been stretched further in 2007 but the recent base rate cuts and the expectation of future cuts will ease debt-servicing burdens in 2008.

“The impact of payment shock on the large numbers of borrowers coming to the end of fixed-rate mortgages will also be less than we anticipated last year.”

Howard Archer, chief UK and European economist at Global Insight, said: “The CML data highlight the downward pressures on housing market activity and prices now stemming from stretched affordability and tighter lending practices.”

The CML is expecting affordability to ease over the year, as house price inflation slows and interest rates come down.