Mortgage lending fell to its lowest level in two years last month and the gloom is set to continue.

Figures published yesterday by the Council of Mortgage Lenders (CML) showed that the total value of home loans granted in December fell to £22.6 billion, down 25 per cent on the previous month and the lowest lending figure since May 2005.

The CML predicted that the situation was unlikely to improve in the coming months.

Michael Coogan, director-general of the CML, said: “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.”

It is not only mortgage lenders who are suffering from the slowdown. Humberts, the estate agent, issued its second profit warning in less than three months yesterday. The company, which has expanded rapidly to 80 branches in the past year and is backed by Vincent Tchenguiz, the property tycoon, said that trading in the core residential agency business had been disappointing since September and forecast that it would make a loss in the first half of the year. Shares in the company plummeted by 42 per cent to 11¼p.

This came just two weeks after LSL Property Services, one of the biggest estate agents in the country, announced hundreds of job cuts. LSL, owner of the 290 Your Move offices, closed 12 branches and cut 315 full-time jobs across its surveying and estate agency businesses.

The slowdown comes at the tail-end of the most successful year for mortgage lenders. Banks and building societies lent a record £362 billion last year, the highest annual total since records began in 1999, the CML said.

Simon Rubinsohn, senior economist at the Royal Institution of Chartered Surveyors, said: “The most timely indicators point to a sharp slowdown in demand for property related loans.”

The record mortgage figures have not been enough to stem the effect of the credit crunch, which has left many lenders struggling to find an appetite among investors for their mortgage books.