Gross mortgage lending fell to around £24bn in February, down 7 per cent from £25.9bn in January, says the Council of Mortgage Lenders.
This is down 6 per cent from £25.6bn in February 2007.
The Bank of England approvals data for January showed subdued levels of house purchase activity and a sharp rise in remortgage approvals, which is likely to be supporting current lending volumes.
CML director general Michael Coogan says: “We have entered a substantially slower phase in the housing market and there will be ongoing problems in the mortgage funding markets unless the Bank of England makes new, broader based attempts to improve levels of liquidity in the UK.
“Demand for mortgages remains strong but cannot be fully met from existing funding. This has led many lenders to reduce their product ranges, increase their mortgage prices and, in some cases, to reduce their lending capacity.
Coogan adds: “As credit conditions change markedly from day to day, lenders will continue to rapidly adapt their products and pricing to match. This is a vital response to the uncertain conditions.”