The housing market ground to a virtual standstill last month as the drought in the mortgage market helped to drive down the number of homes changing hands to levels not seen for four decades, a key survey shows today.

In the latest symptom of dire housing market conditions, the average number of property sales handled by surveyors across the country over the past three months tumbled to only 14.4, or fewer than five a month, according to the Royal Institution of Chartered Surveyors.

RICS blames the near-freeze in housing transactions last month on the scarcity of home loans, with would-be buyers struggling to secure mortgages, and forced to pay significantly more for the loans that can be had.

The institution also sounds a warning that the market is being further undercut as confused signals from the Government over the possibility of future stamp duty concessions from the Chancellor deter potential buyers.

Today's RICS findings underline the scale of the national housing slump, after Halifax figures last week showed house prices falling at an 11 per cent annual rate, marking the first double-digit decline since the end of the last recession in 1992.

However, there are some glimmers of hope for anxious homeowners, as well as potential buyers, with the RICS pointing to tentative signs that activity in the market may be close to hitting a floor, while the scale of price falls appeared to have eased a little. Bank of England figures also revealed a modest fall in some key mortgage rates during the past month.

In a rare dose of more positive news, the RICS survey shows that the proportion of surveyors reporting falling house prices was lower last month, for a third month in a row. Some 83.9 per cent more surveyors still said that prices had fallen in July than said they had increased, but this compared with a low point reached in April of 94.7 per cent more talking of declining prices.

At the same time, the survey also finds that numbers of new buyer inquiries rose last month, while expectations of future numbers of sales among surveyors also climbed amid signs of sellers cutting asking prices.

There was also some relief for those struggling to secure a competitively priced mortgage as the Bank's figures showed that the average interest rate on a two-year fixed-rate home loan, based on borrowing 75 per cent of a property's value, dropped to 6.36 per cent last month, from 6.6 per cent in June.

Meanwhile, the average interest rate last month on a five-year fixed-rate loan, for 95 per cent of a property's value, edged upwards, rising to 7.14 per cent to reach its highest since early 2000, the Bank's figures showed.

Money Central: the latest house price trends, region by region