The property market has seen a decade-long boom come to a halt
Mortgage lending to home buyers has hit its lowest level for 33 years, according to figures from the Council of Mortgage Lenders (CML).
Just 47,000 such mortgages were lent in March, taking the total for the first three months of the year to 142,000.
This was the lowest quarterly total since the first three months of 1975.
The CML predicted lending and house sales would fall even further in the next few months because of the credit crunch affecting the banking system.
"House purchase transaction volumes will continue to deteriorate in the coming months as recent approvals data from the Bank of England has shown," said Michael Coogan, director general of the CML.
The figures chime with the latest survey from the Royal Institution of Chartered Surveyors, which said that falls in house prices were now more widespread than at any time since 1978.
In an attempt to overcome the effects of the credit crunch, the Bank of England recently made extra funds available to UK banks to encourage them to start lending to each other again.
Mr Coogan warned that the bank's efforts had yet to have much effect on the London Inter-Bank Offered Rate (Libor), the main interest rate governing the cost of lending between banks.
"Since the introduction of the special liquidity scheme, there has been a slight improvement in credit market conditions with Libor moving in a more helpful direction," he said.
"But Libor still remains high relative to the Bank rate and any improvement in credit market conditions will take time to feed through into the mortgage market," he added.
However, one of the biggest mortgage lenders, the Nationwide building society, cut some of its fixed rate loans for new borrowers by up to 0.3%.
The society said it was responding to the Bank of England's move to restore lending between banks.
Last week though, the Building Societies Association warned that the current blockage in the mortgage market might last for another two years.
The number of mortgages for house purchase has now fallen by 40% over the past year.
And first-time buyers are continuing to be squeezed out even more than before.
There were 17,800 first-time buyer loans in March, the lowest monthly level on record since monthly figures were first compiled in 2002.
That took the number of first-time buyer mortgages in the first quarter of 2008 to 53,700, which was the lowest quarterly figure since the start of 1975.