Mortgage lending dropped by £2.8 billion between October and November as the housing market slowdown continued to take its toll.
Figures from mortgage lenders, compiled by trade body the Council of Mortgage Lender, show that gross lending fell by 8% from £33.5 billion in October to £30.7 billion in November.
This is also an 8% drop from November 2006 when gross lending hit £33.2 billion.
This is the first time that monthly lending levels have dropped below the same month in the previous year since July 2005.
CML director general Michael Coogan says: "While lending will be subdued in coming months we see this as primarily a result of lack of available funding rather than lack of consumer demand.”
The CML’s figures are backed up by data from the Building Societies Association which reports gross lending of £4.1 billion in November, down from £4.6 billion in November last year.
Adrian Coles, director-general of the BSA, says: “This cooling of activity since 2006 is likely to be a consequence of higher interest rates and a tightening of credit conditions more generally.”
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, says the credit crunch means lenders are being more selective in whom they are willing to lend to.
He warns the situation is unlikely to improve anytime soon: “An early easing in the liquidity squeeze seems improbable despite recent action from the Bank of England. As a result, we expect that some would-be-buyers will struggle to get the necessary finance.”