The ten largest mortgage lenders in the UK slashed spending by almost one fifth last year, figures revealed yesterday.

As the credit crunch began to take grip and property prices tumbled, the companies reduced their lending by a total of £50 billion, according to a report from the Council of Mortgage Lenders.

Lloyds and Halifax Bank of Scotland, which merged last year, saw the most dramatic cuts, followed by the Royal Bank of Scotland. Overall lending by the top ten mortgage lenders fell by 18% to £222.4 billion, with only HSBC and Bank of Ireland increasing lending.

“We have seen a significant reduction to lending. Consumers have found that access to mortgage credit is more restricted,” said the CML.

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The number of house repossessions in the UK fell by 10% in the second quarter of this year compared with the previous quarter, according to a report from the Council of Mortgage Lenders (CML).

However, the 11,400 homes repossessed represented a 14% rise on the same period last year, the CML said.

The group said that early advice for struggling homeowners, low interest rates and a willingness on the part of lenders to allow cash-strapped owners to make affordable repayments had all contributed to the rise. However, it warned the number of repossessions could increase in the next months due to rising unemployment.

“With unemployment rising and the economy still weak, the outlook will remain challenging for the rest of this year and into 2010,” said the CML’s head of policy Jackie Bennett.

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Government proposals to limit house-sharing have been sharply criticised by landlords and student unions alike.

The government has proposed plans to give local councils powers to limit the number of houses in multiple occupation (HMOs) in one area.

House sharing, whereby people who are not related live together in a single property, is a popular option for students and young professionals, but can prove a nuisance for locals who have complained that too many HMOs in one area can lead to anti-social behaviour as well as streets of empty houses during university holidays.

However, those opposed to the plan say the government proposals are discriminatory, affecting large numbers of students, young professionals and migrant workers.

“It is extremely foolish to propose that we displace all of these people in the middle of a housing crisis,” said Wes Streeting, president of the National Union of Students (NUS).

A spokesman for Communities and Local Government said: “Students bring benefits to the places they live in, but too many residing in one area can impact negatively on a community. This is a real problem in many communities across England, which is why Communities Secretary John Denham is committed to finding a long term solution to current rental practices.”

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The housing market is splitting down the middle, with a shortage of properties pushing up prices in the South of England, while selling conditions remain “difficult” in the North, according to a new report.

Whilst overall house prices across England and Wales remained level for the third month in a row, Hometrack reported “the emergence of a clear split in market conditions” between north and south.

The business information service reported price increases in 10% of postcodes, mostly located in the South of England. In the north there were more houses up for sale but weaker demand.

It also takes less time to sell in the south, with the average house selling within 9 weeks, and just 5.6 weeks in London, compared with over 10 weeks in Wales and the north.

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Mortgage lending rose by 17% today to £12.3 billion, according to figures published today by the Council of Mortgage Lenders.

The group said that the increase was driven primarily by seasonal factors, and that lending had reached only half of last year’s levels.

The mortgage market has seen signs of improvement in recent months, with lenders more willing to offer mortgages to first-time buyers and those with small deposits. However, many would-be buyers are still struggling to aquire affordable home loans, with the majority of lenders demanding a deposit of 25% or more.

Although June’s figure for gross mortgage lending, which excludes redemptions and repayments, was the highest this year, it is still down 48% on June last year, when lenders advanced £24.8 billion.

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A government scheme to revive the UK’s ailing mortgage market was “doomed to fail” from the beginning, ministers have said.

The £50bn asset-backed guarantee scheme (ABS) has not resulted in the expected increase in sales, according to the Communities and Local Government (CLG) Committee. The committee added that further steps were needed to boost mortgage lending for the housing market to recover.

Skills and jobs within the UK’s construction industry must also be protected, according to the committee’s report. It warned that following the previous recession it took ten years to rebuild capacity in the industry.

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The UK’s sluggish economy is likely to dampen any recovery in the housing market for months to come, two separate surveys have found.

According to the Royal Institute of Chartered Surveyors (RICS), there will be no “sustained” increase in house prices until more mortgages are made available to consumers.

Meanwhile PricewaterhouseCoopers has predicted further price falls in 2009 and 2010. This warning comes in spite of recent price rises in some parts of the property market.

Recent housing surveys have suggested that the housing market is stabilising, with the Nationwide building society reporting a steady 6% rise in UK house prices since February.

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The housing market is in a far stronger position than it was 12 months ago, the president of the National Association of Estate Agents (NAEA), Gary Smith, has said.

Smith added that the market had stabilised in June after “several months of continuous improvement”, ahead of an expected dip over the summer.

“The Government should scrap Home Information Packs and must pressure banks to ensure lending is available. We know that there is demand for property and that our professional agents are successfully finding buyers for their clients’ properties,” he said.

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Estate agency firm Foxtons today lost a legal battle against the Office of Fair Trading over claims that some of the charges it imposes on landlords are unfair.

The OFT had asked the High Court to uphold the regulator’s decision that terms in its letting contracts, which include charging landlords ongoing commission even if it could not find them new tenants, breached consumer regulations.

The OFT said that clauses hidden among the small print of Foxtons’ agreements for managing tenanted properties were a “trap”.

Following court proceedings that began last February, Justice Mann ruled that parts of Foxtons’ contracts breached the Unfair Terms in Consumer Contracts Regulations 1999, and added that the estate agent had failed to make its terms clear in its literature.

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Two of the UK’s biggest housebuilders have warned that lack of available mortgages is undermining signs of recovery in the housing market.

Both Barratt Developments and Redrow said that the market had remained “relatively stable” over the last six months, but added that potential buyers were still struggling to get the necessary finance. The two firms also noted a sharp drop in selling prices in the year to 30th June.

Barratt reported an 11.9% increase in the number of visitors to new home developments in the six months to 30th June compared with the previous six months, whilst Redrow saw sales of private homes go up by 22% over the last six months.

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