Just 50,300 loans were extended - 11,700 fewer than in December and 25,500 fewer than in January last year and the average mortgage value dropped from just under £137,500 to £134,100 for first time buyers and £117,921 to £115,000 for home movers.

The dramatic decline reflects the fact that since the financial crisis that struck the banking system last summer, lenders have been finding it very difficult to raise funds from other financial institutions to offer as mortgages to their customers and they have become much more rigorous in their criteria for potential borrowers.

The CML also said that lenders' tougher loan criteria were forcing borrowers to put down larger deposits which is having a discernible impact on first time buyers and which in turn is exacerbating the slowdown in house prices.