Approvals fell by 46 per cent year on year, from 65,841 to 35,417, and from the February figure of 43,147 to the lowest level seen since the current statistical series began in September 1997.
The BBA says all forms of mortgage approvals weakened in March and at 129,300 are at their lowest level since September 2000.
Remortgages dropped from 69,997 in February to 60,503 in March, a fall of 7.9 per cent from the same time a year ago. Equity withdrawals also saw a drop from 40,252 in February to 33,419 in March, falling 29.6 per cent from March 2007.
The figures show that remortgages continue to represent the main share of approvals, totalling nearly half of March’s figures.
The BBA says gross lending was £16.6bn in March, down from £17.6bn in February and a 14.7 per cent drop from last year.
Last week, the Council of Mortgage Lenders revealed that gross mortgage lending had increased by 5 per cent to £26.3bn in March compared to February but the figure was down by 17 per cent from £31.7bn in March 2007.
It says an increase of around 20 per cent is typically expected between February and March.
BBA statistics director David Dooks says: “The consequences of low banking sector liquidity show up clearly in March data. Reduced product ranges and tighter criteria resulted in slower mortgage lending and significantly fewer loan approvals. Press-ures on personal finances are also constraining demand, not only for mortgages but also for personal loans and borrowing on cards.”