Mortgage lending in July fell to £14.6 billion, lower than June and less than half the £31.4 billion borrowed in July 2007.

There were 33,000 approvals for home loans in July, compared to 35,000 in June and 115,000 this time last year, the Bank of England said.

Remortgaging figures remain higher, at 69,000, although this is lower than June, when there were 80,000 remortgaged loans approved.

The Royal Institution of Chartered Surveyors (Rics) has been calling on the government to assist the ailing housing market, as housebuilding slows and prices fall.

Oliver Gilmartin, Rics senior economist, said: “Yet another low for mortgage activity offers little hope that house price declines will find a floor any time soon.

“Buyer interest has shown some murmurings of a recovery in recent months but with the barrier of mortgage finance fortified by the day, pent up demand will only exacerbate the boom-bust cycle once a return to normal market conditions resumes.

“In the meantime, the government must find effective ways to prevent a collapse in housebuilding activity which will drag the economy further towards technical recession.”

The latest house price index from Nationwide shows UK property prices fell 1.9 per cent during the course of August, taking annual falls to 10.5 per cent.

This is the first time falls have entered double digits since 1990, the building society said.