Mortgage lending will recover in time. However, it is likely to remain at current levels over the coming months.

This is the opinion of Timothy Lambert, head of consulting at Ducalian, who said that while the economy is beginning to show growth once again, it is still in an extremely fragile state.

He noted that it will take time for confidence to return to lenders, despite the government putting pressure on them to provide finance.

"After the worst recession in decades, which was exacerbated by excessive and unscrupulous lending in the states, mortgage lenders have now been given obligations to lend more but are also being careful about who they lend to," Mr Lambert explained.

With a change of government likely this year, lenders are wary of providing low-rate fixed mortgage deals as interest levels "can only go one way", he added.

Research published by Paragon Mortgages earlier this month revealed that 58 per cent of brokers expect to see an increase in home loan activity during the first quarter of 2010.

Written by Emily Sanders