North south divide widens

The bulletin also claims that house prices would continue to fall, down 2.6% on the year and 0.3% in the three months up to August.

Gross lending in 2011 also looked as if it would match 2010 levels of around £136bn, with lending of £130 - £135bn likely in 2010.

Robert Sinclair, director of AMI, said: “Our report shows that at a national level house prices have fallen by 2.6% compared with last year. However, a closer look also shows that the gap between regional house prices is expanding.

"Clearly, evaluating house prices on a national basis is less and less useful in building a true picture of the market.

"Overall levels of transactions are down and without sufficient mortgage funding there will be no way for transactions to grow substantially. Cash buyers will have an impact, but there is a limit to the effect they can have on transaction volumes. More funding will be required before there is a return to previous transactions levels.

“Remortgage volumes have increased compared to last year, this has been fuelled by an increased take up of fixed rate products compared to 2010.

“Although interest rate rises appear to be off the agenda for the moment, more consumers are looking to secure attractive low fixed rate product in light of economic uncertainty.”