Mortgage lending dropped 10% in September making it more difficult for first-time buyers to secure financing, says the Council of Mortgage Lenders.

Additionally, gross lending was down to £17.7bn in September, a 10% decrease than in August and 42% drop from last year. According to CML, gross lending for the year is estimated to stand at £255bn, a 30% decline from £363bn in 2007.

CML’s director general, Michael Coogan said: “Weakening consumer demand and ongoing funding constraints will dampen monthly lending figures for the rest of this year and into the first quarter of 2009.”

However, Howard Archer, chief UK and European economist at analysis group Global Insight, said the Bank of England’s decision to cut interest rates from 5% to 4.5% was a positive move but, he was quick to point out that it will take longer for market to gain confidence and for lending to pick up.

He said the market will benefit from pledges made by HBOS, Lloyds TSB and RBS to offer mortgages at 2007 levels. Archer said: “Housing market activity continues to be hammered by the highly damaging combination of extremely tight lending conditions and still-stretched buyer affordability.”

Archer said: “Housing market activity continues to be hammered by the highly damaging combination of extremely tight lending conditions and still-stretched buyer affordability.”

Figures from the CML suggest that gross lending for the third quarter reached £62bn, fell 16% from the second quarter of 2008. It was 37% from the third quarter of 2007.