Last year saw the strongest gross mortgage lending to date, but the market is weakening, the Council for Mortgage Lenders (CML) has said.

CML figures showed gross lending reached £362bn in 2007, up 5% from £345bn in 2006, and above its forecast.

However, gross lending was £22.6bn last month, down 25% from November and the lowest monthly figure since May 2005.

The CML said the problems in the credit markets were still limiting lenders' ability to advance money.

"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," said CML director general Michael Coogan.

"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," he added.

However, despite the funding constraints caused by global economic conditions, Mr Coogan insisted the UK mortgage market was "highly competitive", and would continue to offer a range of good deals to "better risk borrowers".

Jan 21, 2008