Mortgage lending collapsed in early spring as the recovery in the housing market ran out of steam ahead of the general election.
Bank of England figures today showed net lending tumbled 83% from £1.85 billion in February to £318 million in March in a blow to Gordon Brown just two days before votes are cast.
It was the worst reading since July last year and came after the Government reinstated stamp duty for houses worth £125,000 to £175,000.
Potential buyers were also put off by political and economic uncertainty surrounding the tightest general election since 1992.
Hetal Mehta, senior economic adviser to the Ernst & Young Item Club, said the figures were "indisputably weak" and warned that house prices will not go up this year.
She said: "The mortgageless recovery is unlikely to be sustainable and there are already signs that house price inflation is slipping as supply pressures abate thanks to higher prices encouraging more people to put their properties on the market.
"With unemployment set to remain high, housing demand is likely to remain weak. We expect house prices to stagnate over the course of this year, and anticipate only a gradual recovery in 2011."
The number of mortgages approved for house purchase edged up from a nine-month low of 46,882 in February to 48,901 in March having hit nearly 60,000 in the final few months of last year.
Analysts said the fall in the amount of money lent in March reflected the drop in the number of mortgages approved in January when the stamp duty holiday ended.
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Vicky Redwood, senior UK economist at Capital Economics, said: "The housing market is struggling to regain momentum after faltering at the start of the year. Clearly this casts doubt over the sustainability of the recent pick-up in house prices."
Following the end of the last stamp duty holiday, the Government has scrapped the tax for first-time buyers spending less than £250,000. The subdued level of mortgage lending led to overall net lending, including credit cards and other loans, rising by just £643 million in March, also the lowest level since last July.
Howard Archer, chief UK economist at IHS Global Insight, said: "Consumer credit remains very low compared to past norms, and this seems likely to remain the case for some time to come given low consumer appetite for new borrowing."
