The Building Societies Association said the housing recovery was still on track despite the slight setback, with mortgage advances well above the previous year's level. Adrian Coles, director-general, said: "The slight fall in lending is not a sign of faltering recovery but rather that it is more stable and likely to be sustainable in the longer term."
The strong but steady outlook for the housing market was supported by Abbey National, one of the biggest mortgage lenders.
Predicting a 7 per cent rise in house prices in 1997, retail managing director Andrew Pople said: "We do not anticipate - and would not welcome - a return to the boom-bust cycle of the late 1980s."
He added: "We do not expect interest rates to rise significantly in the foreseeable future, which in turn will underpin consumer confidence."
Economists suggested that the slight setback to borrowing reflected the withdrawal of cheap fixed-rate mortgage deals after the 30 October increase in base rates. "There is little sign of a strengthening trend in personal sector borrowing," said John O'Sullivan, an economist at NatWest Markets.
New lending by the building societies fell from pounds 1.5bn in October to pounds 1.3bn in November, still 73 per cent higher than a year earlier. Separate figures from the main high-street banks showed a dip in their mortgage lending from pounds 623m to pounds 610m.
However, the British Bankers' Association said their total lending was well above October's figure. It rose to pounds 4.6bn from pounds 2.8bn, inflated by an pounds 800m loan by one bank to a subsidiary.
Even adjusting for this, the BBA said there was demand for loans from across all economic sectors. It was particularly strong from service industries, while a jump in borrowing by leasing companies pointed to higher investment spending in industry.
The buoyant loans picture made for a higher-than-expected jump in total lending and in M4, the broad measure of the money supply. New loans in the economy amounted to pounds 7bn, about the same as the previous month and 10 per cent higher than last November.
The annual growth in M4 increased from 10.5 per cent to 10.8 per cent, highest rate for nearly six years.
The steady acceleration in broad money growth during the year has concerned the Bank of England, even though the introduction of the gilts repo market has exaggerated the pace. Many in the City thought that, after strong retail sales and a big drop in unemployment, the lending figures would lead the Bank to press harder for another rise in base rates.Reuse content