According to the Council of Mortgage Lenders (CML), the economic downturn will cause a huge rise in mortgage arrears in 2009, with the number of households over three months behind on their repayments breaching the 500,000 mark.

The CML said 2009 would be a rough year on account of the recession driving up unemployment that would cause around 75,000 home repossessions.

The government intends to go ahead with a "mortgage holiday" plan with to keep more families in their homes. However, mortgage experts believe that the plan could backfire and be an incentive for people to incur even more debt by deferring payments.

Reports suggested that repayments have outstripped new borrowing for the first time since 1964, when record keeping began. Lack of demand is expected to drive prices down further, with the average expected fall of around 15 per cent in 2009.

The drying up of lending and the consequent mortgage drought is also expected to cause a further drop in the number of homes changing hands.

Only 700,000 transactions took place during the year, down from 1.63 million in 2007. Net lending, which is the amount of new borrowing less repayments and people re-mortgaging, is likely to dip into the red by £25 billion next year, below net lending of about £40 billion this year and £108 billion in 2007.

Economists were reported to have said that the housing market would take longer to recover, with the recession being longer and deeper than previously thought. The CML said that despite initiatives from the government and industry, 2009 would be a "very tough year" for the mortgage market.

If CML's repossession forecast is accurate, the number of homes repossessions in the UK would have risen nine-fold in just five years.

In its market commentary for 2009, the CML said "The worsening economic backdrop will inevitably lead to a rise in the number of borrowers losing their jobs and facing disruption to their income. Even though lenders will seek to minimise repossessions in 2009, the worsening economic backdrop does point towards an inevitable increase in the number of cases where a sustainable alternative solution cannot be found."

The Conservatives said CML's prediction was proof that the government's plan to help people avoid losing their homes was doomed to failure. Prime minister Gordon Brown had announced earlier in the month that people who lost their job would be allowed to stop repaying the interest on their mortgage for up to two years.