PESSIMISM about the future of the housing boom increased yesterday following the publication of two downbeat reports.

mortgage lending fell by £1bn last month, according to the Council of Mortgage Lenders (CML), prompting speculation that price rises are likely to slow down.

In a separate report, research group Capital Economics predicted house prices would fall by 20 per cent during the next three years as the booming property market corrected itself. Despite this, the think tank said it expected prices to rise by a further five or six per cent by the end of the year, before beginning to fall at the beginning of next year.

But economists described reports that the Bank of England's consecutive rate rises had taken the fire out of the property sector as premature.

David Page, an economist at Investec, said he did not think the figures showed the mortgage market was slowing.

He said: "It is unlikely that we will see any slowdown coming through any time soon."

The CML said advances last month were £23.8bn, down from £24.8bn in April.

Michael Coogan, director general of the CML, said: "Reduced affordability, exacerbated by the cumulative effect of rising interest rates, is acting as a natural brake.

"But the under-supply of property, and the continued aspirations of most people to own their homes, makes it likely that house price increases will slow down rather than stop."