A FURTHER sharp fall in new mortgage advances in recent weeks looks set to test Scottish hopes of avoiding the worst of the housing crisis this summer.

Latest figures are still being collated but industry experts believe they will indicate a fall of at least 30% in home loans over the past few weeks, compared with a 20% decline in the opening quarter of the year.

The lack of activity indicates steeper price falls in the coming months after a relatively modest 1.8% average decline recorded by Nationwide between April and June.

Kennedy Foster, policy consultant at the Council of Mortgage Lenders Scotland, said: "I haven't got the official figures yet but anecdotal feedback certainly suggests that there has been a further slowdown in the market over recent weeks."

This bodes badly as the market gears up for another major test in the autumn, amid concerns that there could be a rush of new properties coming on to a weak market to beat the costs of preparing for the controversial home reports. These will require properties to be marketed with a survey and energy efficiency report when they come into force at the start of December.

Glasgow Solicitors Property Centre, representing 200 members, has already called on communities minister Stewart Maxwell to postpone the home reports' introduction to "such a time when sellers feel confident they will be able to sell".

At this stage, the Royal Institution of Chartered Surveyors Scotland is still putting on a brave face over market conditions, although it last polled its members on price movements back in May, before the latest downturn.

"Scotland is still seeing new instructions coming on the market although the number is dropping marginally each month," commented director Graeme Hartley. "Yes, the market is slowing but we're not about to see it grind to a complete halt."

Up to now, Scottish house prices have held up far better than in England, partly because they tend to be more affordable but also because buyers usually put down larger deposits and are cushioned from the worst effects of tighter borrowing rules introduced by mortgage lenders.

But much of the industry is controlled by the huge building groups based down south, which have already cut back on their new developments in Scotland to conserve cash resources and could undermine the market with distressed sales to raise finance.

Homes for Scotland, the body which represents local developers, has already warned that it will not be possible to meet Scottish government targets of 35,000 new homes a year "while consumer confidence languishes at an all-time low".

Last week, the market-leading Taylor Wimpey underlined the scale of the housing market's problems when it failed to raise £500 million from its shareholders and announced that reservations for new homes had plunged 45% in recent weeks. In savage market conditions, its share price plunged by 42%, removing £267m from the company's value.

Further poor news is expected on Tuesday when Persimmon, the former Beazer group that owns Charles Taylor Scotland, is due to update shareholders after previously warning of a 24% decline in sales in the early part of this year.

Analysts believe that the group could follow Taylor Wimpey with a similar story of a further deterioration in its business and fear news of job losses and a writedown in the value of its £2.3 billion land bank.

Persimmon took early action to conserve its cash by calling a halt to all new developments, including seven in Scotland, earlier this year and is believed to be in a stronger financial position than rivals such as Taylor Wimpey and Barratt.

Even so, its shares have plunged from more than £14 to current levels of around 217p since the start of this year and it has been evicted from the FTSE100.

It has a stock-market value of around £650m at the present share price although its net assets were said to be worth some £2.4bn at the end of its last financial year.

The fall in the share prices of all building companies reflects expectations that the market will continue to struggle for years ahead.

Analysts at UBS say prices could fall by up to 30% eventually, with volumes down by a similar amount.

They believe the major builders will be forced to shed anywhere between 10% and 30% of their workforce and to close many of their regional offices in Scotland and elsewhere in a bid to balance their books.