Lending for purchase drops more than 50%

The loans, worth £5bn, also represent a 15% fall in value from the previous month.

The story is slightly better on remortgages, with 62,000 loans for remortgage worth £8.5bn in September, down 15% in volume and 16% in value from August, but still around two thirds of September 2007 levels.

Michael Coogan, director general of the CML, admitted house purchase activity had reached “exceptionally low levels”.

He added: “Banks and building societies do want to support homeowners, but they have limited funds available and are, quite reasonably, taking a prudent approach to risk. If the pricing and volume of interbank lending continues to improve, this should help the flow of mortgage lending.”