Gross mortgage lending fell 14% in August to an estimated £11.4bn, the lowest figure for the month since 2000, according to the CML.
August mortgage lending was down sharply on July's £13.3bn and 6% down year-on-year from £12.1bn in August 2009.
Lending volumes are likely to remain below last year's level in the coming months due to activity in the last few months of 2009 being buoyed by the end of the Stamp Duty holiday, the CML says.
Bob Pannell, chief economist at the CML, says: "The second half of 2010 was always going to be challenging. Looming public sector spending cuts are an inevitable brake on the economy in the short-term. The rate of growth in the second quarter will likely be a high point.
"Meanwhile, the financial system is facing up to the need to move away from government support. The result is a more restricted flow of credit to the wider economy as balance sheets adjust - always a prolonged process."
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