Conveyancers are seeing fewer approaches from first-time buyers amid tightening credit conditions, increasing mortgage repayments and fears of a house price meltdown.

And now news that mortgage lending has fallen by 17% since the same period last year is the latest evidence that the housing bubble has finally burst.

The Council of Mortgage Lenders (CML) has released its provisional estimates for March, which show that lenders dished out a total of £26.3 billion in new home loans and remortgages compared with £31.7 billion for the same month last year.

Leading investment institutions are warning that the bloated UK housing market would slump by at least 10% in the next two years, with up to one in ten homeowners slipping into negative equity.

The weakening housing market is also hitting housebuilders – with the UK’s largest, Taylor Wimpey, reporting a 26% drop in orders for new homes.

Despite Bank of England attempts to prop up the housing market with base rate cuts and plans to stimulate lending between banks, lenders are still bumping up rates on some of their mortgages.

Chief UK and European economist at Global Insight, Howard Archer, said that the low level of mortgage activity was down lower demand for housing, fewer and more expensive mortgages and, a particular problem for first-time buyers, higher deposit levels.