Meanwhile gross mortgage lending fell 4 per cent to pounds 6.88bn in May compared with April, although it was 9 per cent higher than in May last year, according to the Council of Mortgage Lenders.
The picture is even less buoyant if home-owners remortgaging existing properties to take advantage of cheaper mortgage rates - including fixed- rate offers from rival lenders - are excluded from the statistics. So far this year remortgages account for at least 25 per cent and maybe as much as 35 per cent of all gross lending.
Net lending, which excludes redemptions, repayments and also remortgages fell 22 per cent between April and May and was also 16 per cent lower than in May last year. Remortgage applications have also helped boost the latest figures for mortgage approvals, which were up to 123,000 transactions in May, while the value was 16 per cent up on a year before at pounds 7.6bn
Property sales however showed a fall to 108,000 in May, the lowest figures since September 1996. Nationwide described the low level of sales as disappointing, making it unlikely that its original forecasts of a 5 per cent rise in property sales to 1.53 million will now be reached.
A spokesman blamed the rise in mortgage rates and the growing feeling that unemployment has bottomed out and could soon start to rise again. Other lenders claim, however, that more than half of all mortgages are now fixed-rate loans which protect borrowers from immediate rate rises.
The Royal Institution of Chartered Surveyors yesterday claimed that house price inflation has levelled off thanks to a welcome increase in the supply of properties coming on the market. The average house is fetching 96 per cent of the asking price but the time taken to sell property has risen from 11 weeks in February to 13 weeks now, according to Black Horse Agencies, now part of Bradford & Bingley.