"Persisting supply and affordability issues appear to be exerting an ongoing restraint on growth, meaning there is some uncertainty around how the market will perform going into 2017."
Home movers borrowed £12.5 billion, totalling 32,400 loans, down 3% by value and 10% by volume on 2015.
However first-time buyers and remortgagors fared better, with borrowing up 3% and 21% respectively.
Paul Smee, CML director general, commented: "The number of home buyers in London fell to a four year low in 2016. Home mover activity in particular continues a downward trend, with the fewest loans since 1991. Persisting supply and affordability issues appear to be exerting an ongoing restraint on growth, meaning there is some uncertainty around how the market will perform going into 2017.
"By contrast, remortgage activity appears to be experiencing a resurgence. Competitive mortgage rates aided by low interest rates have sparked remortgage levels not seen in the Capital since 2008."
Homemovers also struggled in Scotland with activity dropping 7% by value and 8% by volume on 2015.
First-time buyers borrowed £3.4bn, up 5% on the previous year, and remortgage activity also remained strong at £3.4bn, up 10% on 2015.
First-time buyers in Wales accounted for a greater share of lending than in any year since 1999. First-time buyers borrowed £1.7bn, up 17% on the previous year. This totalled 14,700 loans, up 11% on 2015.
The home mover market also remained strong with borrowing up 7% by value and 2% by volume on 2015. Remortgage activity totalled £1.8bn, up 14% on 2015.
Julie Ann Haines, CML Cymru chair, said: "More people took out mortgages to buy homes in Wales in 2016 than in any year since 2007. It is particularly notable that first-time buyers accounted for a greater share of lending than in any year since 1999, and affordability in Wales compares positively with the UK as a whole."
Northern Ireland saw its strongest year for house purchase lending since 2007. Home buyers borrowed £1.5bn for house purchase, up 11% on 2015.
This was driven by first-time buyers who borrowed £780m, up 18% on the previous year, and remortgage activity which saw a 13% rise in lending.
Derek Wilson, CML Northern Ireland chair, added: "The UK overall saw lending fall in the fourth quarter, but in Northern Ireland lending rose, led by first-time buyers. 2016 was the strongest year for house purchase lending since 2007. Affordability compares favourably with the UK as a whole, and we anticipate a steady market in 2017."
