The housing market slowed to a virtual halt at the end of last year as the number of properties sold reached a record low, the Royal Institution of Chartered Surveyors (RICS) said. It blamed the lack of mortgage finance for the lowest transaction levels in 30 years.

Surveyors reported that potential buyers, including first-timers, had been unable to take advantage of falling house prices because lenders would not grant home loans at affordable interest rates to any but the most cash-rich investors.

RICS said that an average of 10.1 properties per surveyor had changed hands in the three months to December 2008, down from 10.6 in the three months to November, the lowest since it began to compile the survey in 1978.

Simon Hickley, a surveyor at Maxey & Son, a East Anglian-focused business, said: “Without doubt the Christmas quiet period came early. Lack of lending to anyone without a big deposit is the main cause of the lack of activity in the market.”

Although average house prices fell by 15.9 per cent last year to £153,048, according to Nationwide, buyers wishing to get on the ladder must find thousands of pounds extra to fund the size of deposit required by lenders.

Harsher lending policies have pushed up the average deposit that first-time buyers need from £11,791 in October 2007 to £21,198 in October last year, according to the Council of Mortgage Lenders.

The best-buy interest rate on a mortgage for a buyer with a 40 per cent deposit is 3.99 per cent, against 6.39 per cent for a buyer with 5 per cent, according to Moneyfacts, a personal finance website.

On a £150,000 home loan, the difference in monthly repayments between the two is £212.

However, big reductions of as much as 40 per cent off asking prices and lower interest rates are luring buyers, as the number of inquiries rose for the second month in a row in December and at the fastest pace since August 2006, RICS said.

The proportion of surveyors reporting price falls also eased slightly, from 75.8 to 73.5 per cent in December, while the number of unsold homes rose by 1.1 per cent over the year to December to an average of 78.1 per agent as struggling homeowners decided to sell.

Robert Bartlett, chief executive of Chesterton Humberts, the London-based estate agency, said: “While there was evidence of the traditional Christmas lull in December, with both transaction numbers and prices slipping, the number of viewings held was virtually equal to 2007 and the number of offers made exceeded last year's figures.”

RICs said that the proportion of surveyors reporting falls had improved in the South East, East Anglia, Wales, the South West, Yorkshire, the East Midlands and Northern Ireland.

It was stable in the North, North West and West Midlands but had got worse in Scotland.

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