Mortgage lending grew at its slowest rate for 10 years last month and house purchase approvals fell to an 18-month low, exacerbating fears of a "double dip" back into recession.
Net lending grew by just £1.6bn in September - the feeblest rise since October 2000 and a far cry from both last September's £2.9bn and the £2.2bn six-monthly average, the British Bankers' Association (BBA) said yesterday.
Gross lending, which includes redemptions and repayments, came in at barely £8bn, some 11% lower than last year and only around half the 2008 level before the financial crisis.
The gloomy BBA figures echo last week's report from the Council of Mortgage Lenders and follows research from Markit yesterday, showing housing market sentiment "lurching downwards".
Mortgage lending levels are not the only weak area, according to the BBA. The number of house purchase approvals also continued to drop, reflecting falling demand.
Last month saw some 31,100 approvals, the fewest since March 2009 and nearly 5,000 fewer than the six-monthly average. And the average value of new mortgages dropped, albeit only fractionally, to £142,900.
Consumer borrowing patterns are also increasingly subdued, faced with growing uncertainty and government plans for £81bn-worth of cuts, outlined in last week's Comprehensive Spending Review. Personal savings levels rose by 4.6% last month, while demand for unsecured credit, particularly on personal loans, dropped by 7%, taking it down by 1.6% over the 12 months as a whole, the BBA said.
Broadly flat credit card lending levels reflect a similar pattern as £5.9bn-worth of new spending in September was offset by £6.1bn-worth of repayments.
"Subdued mortgage activity and little demand for unsecured credit are a reflection of household uncertainties ahead of the spending review," BBA statistics director, David Dooks, said.