Mortgage lending could be halved this year without extra funding from the Bank of England, the Council of Mortgage Lenders warned.

Mortgage lending could be halved this year without extra funding from the Bank of England, the Council of Mortgage Lenders warned.

CML chairman Steven Crawshaw yesterday said home loans could fall to half last year's £108bn as banks and building societies struggle with more expensive funding following the credit crunch.

Mr Crawshaw, chief executive of Bradford & Bingley, said: "Potential borrowing still significantly exceeds the industry's collective capacity to supply funds.

"It is therefore a real possibility that net lending in 2008 could reach only half last year's level unless additional funds become available."

A host of lenders have withdrawn mortgage deals in the past two weeks, with several hiking costs on fixed-rate deals.

Mr Crawshaw urged Bank of England governor Mervyn King to "show leadership", saying there was a "real and immediate need for broader based action than we have seen to date".

Central banks have tried to combat the credit squeeze by pumping billions into frozen money markets with little success.

The CML chairman said longer and deeper funding facilities from the bank were needed because lenders, concerned over their ability to access future funding, were managing their businesses "very cautiously".

Meanwhile British holidaymakers heading for Europe will get even less for their money as the euro hit a record high against the pound trading at around 80.29p.