MORTGAGE lending in Scotland has plunged by a third due to the credit crunch - creating a crisis in the housing market.

New figures from the Council of Mortgage Lenders Scotland reveal only 18,500 mortgages were granted between April and June as funding for lending dried up.

That's a 34% fall on the same period last year, when 28,200 home loans were taken out. Experts say it means 746 fewer mortgages being taken out every week.

That shortage of funding has seen a huge drop in people buying houses, leading to prices starting to fall in some areas.

The problem is particularly severe for first-time buyers, who are finding it almost impossible to get a mortgage.

The figures show there were just 6600 loans to first-time buyers in the second quarter of 2008, which was 31% lower than the 9600 in the same quarter last year.

In its report, the council said: "Lending criteria have tightened in response to the shortage of funding and market conditions.

"This is making it more difficult for first-time buyers with smaller deposits to enter the market. The average first-time buyer in Scotland needed a deposit of 13% in the second quarter, up from 10% a year ago."

However, it said Scotland was faring better in the unfavourable conditions than the rest of the UK.