Gross lending in February has dropped 3.5 per cent from £25.9bn in January to £25bn, according to the Council of Mortgage Lenders.
It says that loans for house purchase declined in volume to 49,000, down 3.5 per cent from 50,900 in January and by 5.1 per cent in value to £7.5bn.
The number of loans for house purchase has been more than 30 per cent lower than a year ago for the last three months. The CML says this picture of year on year declines is likely to continue throughout 2008.
Remortgaging made up 45 per cent of all lending in February. The CML says that this is unchanged from January and the highest share since March 2005.
Figures from the CML also shown that the popularity of tracker rate mortgages increased in February as the proportion of borrowers choosing fixed rate loans fell to 52 per cent, its lowest level since March 2005.
The proportion of borrowers choosing tracker-rate loans increased to 35 per cent, from 33 per cent in January and 14 per cent in February last year.
It says that floating rate products have become increasingly attractive compared with fixed-rates as consumers expect further Bank base rate reductions in the coming months.
CML director general Michael Coogan has urged the Bank of England to use more broad-based and flexible measures to increase liquidity levels in the UK market so that firms have sufficient funding available to match consumer borrowing demand this year.
Coogan adds: “The trend away from fixed-rate products continues as expectations of further Bank base rate reductions, probably starting this week, have increased.
“The February figures relate to completions of transactions started several months ago. More recently, there has been consistent evidence of tightening in lending criteria which will lead to shrinking pipelines of new business as the recent Bank of England’s credit condition survey made clear. We expect this process of further tightening in lending criteria to continue in the second quarter as lenders respond to the challenging market conditions.”