The mortgage market is shrinking under the impact of the continuing problems in the banking system, say lenders.

Figures from the Council of Mortgage Lenders (CML) show that new loans for home buyers fell to 50,300 in January, the lowest level for nine years.

That was 11,700 fewer than in December and 25,500 fewer than in January 2007.

The CML also said that lenders’ tougher loan criteria were forcing borrowers to put down larger deposits and accept smaller mortgage offers than before.

“The wholesale funding markets remain largely closed and mortgage funding still remains constrained,” said the CML’s director general Michael Coogan.

The credit crunch is now having a meaningful impact on the availability of finance for home purchases

Simon Rubinsohn of RICS said: “This is now having a discernible impact on lending criteria and the ability of first-time buyers to get into the housing market.”

The number of new loans being taken by house buyers is just under half that lent a few months ago in August 2007, when there were 103,000 such loans.