The number of new mortgages has fallen by 46 per cent since last March, it has been revealed.
Figures from the British Bankers' Association (BBA) show that since last year, there have been 35,417 mortgage approvals for house purchases - the lowest level ever recorded by the organisation.
BBA statistics director David Dooks attributed the decline to fewer products on the market and tightened lending criteria from providers.
"Pressure on personal finances are also constraining demand, not only for mortgages, but also for personal loans and borrowing on cards," he added.
Last month, £5.6 billion was advanced for housing purchases - a 43.7 per cent decrease on March 2007's figures.
Commenting on the BBA report, Simon Rubinsohn of the Royal Institution of Chartered Surveyors stated that the Bank of England's announcement of a £50 billion swap arrangement will provide much-needed liquidity for lenders.
However, he added that it will not "turnaround the current challenging environment overnight".
