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New data from the Council of Mortgage Lenders (CML) has heaped further bad news on the property market, showing lending fell dramatically in May.

While gross lending totalled an estimated £25.5 billion in May, this is some 19 per down in the £31.5 billion high lent in May 2007, according to the CML.

The figure is also down two per cent from £26.1 billion lent in April, suggesting the worst of the credit crunch is yet to pass.

"The remortgage market remains on track to meet our forecast for growth this year, demonstrating the resilience of the market despite recent bad news," explained

"However, by comparison, the next few months will remain very weak for house purchase activity for the funding reasons which are now well rehearsed.

"We still await first signs of the Bank of England’s Special Liquidity Scheme indirectly helping to ease the current logjam."

The Bank of England pledged £50 billion to the banking sector in loans traded for mortgage assets, with the figure now expected to rise to £90 billion.

However, the money has yet to be distributed, muting the impact of the scheme.

Monthly lending levels have continued well below their position last year but at good historic levels, the CML said in a statement,

The Bank of England’s approvals figures show that this pattern will continue in coming months, and that lending activity has strongly focused on the remortgage market.

But a wide range of banks and building societies continue to offer a range of mortgages in the market place, despite the credit crunch and funding constraints.

The news confirms what was already a grim day for the property industry.

HOBS – owner of the UK's biggest mortgage lender, Halifax – now predicts house prices will fall nine per cent this year, while Bank of England governor Mervyn King warned the UK economy now faces its toughest challenge in two decades.

Commenting on the CML data, Howard Archer, economist with Global Insight, said: "The bad news on the housing market is pretty relentless at the moment, with the low level of mortgage activity for house purchases being a consequence of a damaging mix of stretched buyer affordability and very tight lending conditions.

"Elevated affordability pressures on potential house buyers stem from high house prices and modest disposable income growth, while very tight credit conditions are leading to markedly fewer and more expensive mortgages being available."