Mortgage lenders are experiencing a drop in demand for home loans.
Gross mortgage lending declined in September to reach the lowest figure since January 2005.
Data from the Council of Mortgage Lenders (CML) shows that £17.7 billion was borrowed by homebuyers last month, down ten percent on August and 42 percent on September last year, as demand for loans fell.
September is traditionally a weaker month in terms of house buying and remortgaging, the CML points out. However, this September's figure was also the lowest since 2001. The organisation now predicts that gross lending will be around £255 billion this year compared to the 2007 total of £363 billion.
CML director general Michael Coogan said: "The mortgage market is open for business. But weakening consumer demand and ongoing funding constraints will dampen monthly lending figures for the rest of this year and into the first quarter of 2009."
Howard Archer, chief UK and European economist at Global Insight, described the figures as "awful". He said they show that the housing market has been dealt a damaging blow by the credit crunch and problems of buyer affordability.
Meanwhile, Rightmove has recorded its largest ever one-year fall in asking prices. The firm said houses being put on the market in October were 4.9 percent less expensive than they were 12 months ago.
