House purchase lending fell 26 per cent in January to £4.2bn from £5.7bn the month before, according to figures from the Council of Mortgage Lenders.
The trade body says rising inflation, increasing pressure from tax measures and government spending, and extreme winter weather led to a lack of movement in the mortgage market.
There were 28,500 loans advanced for house purchase, a fall of 29 per cent from the 40,000 loans advanced the month before.
The number of remortgage loans fell 6 per cent from 23,000 to 22,100 in January. The value of the total remortgage loans advanced fell 5 per cent from £2.9bn in December to £2.7bn.
CML director general Michael Coogan says: “”Pressures on household budgets have been increasing both in terms of take home pay, and indirect tax measures such as the VAT increase and recent inflationary pressures, so we were expecting a fall in transactions early in the year, and a flat mortgage market underpins our forecasts for 2011.”