There was fresh evidence of a cooling housing market yesterday after mortgage lending slowed further in November, the British Bankers Association (BBA) said.
The UK's main high street banks lent £4.3 billion on mortgages in November - £500 million less than the previous month.
While the number of mortgage approvals recovered by four per cent to 44,811 from a record low in October, the figure was almost 44 per cent below the level of approvals a year earlier.
BBA statistics director David Dooks said: "Mortgage activity is notably lower than this time last year.
"Judging by the significantly lower number of mortgage approvals in October and November - partly resulting from lower demand, partly from tighter supply - the market is likely to continue slowing in the coming months."
The Bank of England cut base rate to 5.5 per cent earlier this month after five quarter-point rises since August 2006, but policymakers are expected to cut rates at least twice next year.
Experts added that the slight increase in approvals combined with lower lending levels also signalled a more cautious approach from banks.
Howard Archer, chief UK economist at Global Insight, said: "The weak mortgage data provides yet further evidence that housing market activity is now slowing markedly in the face of stretched affordability, as well as the tightening lending practices resulting from the credit crunch."
The BBA figures also showed consumer credit growing at 4.6 per cent in November - with a marginal rise in unsecured lending - although repayments continue to outstrip new spending. Annual growth in loans and over-drafts has fallen back by more than half from nearly 10 per cent to 4.3 per cent.
Separately yesterday, Bank of England data also showed that UK homeowners released £10.5 billion from the value of their houses in the third quarter of 2007.
The figure was £500 million ahead of the previous three months, although well below the £13.4 billion peak in the final quarter of 2006 - reflecting growing doubts over future house prices and more expensive remortgaging costs.
The figure for the second quarter was the lowest since the third quarter of 2005.
As a proportion of post-tax income, housing equity withdrawal accounted for 4.6 per cent in the third quarter of 2007, up from 4.5 per cent in the previous quarter.
Housing equity withdrawal is new borrowing secured on dwellings that is not invested in the housing market, representing additional funds available for reinvestment or to finance consumption spending.
Despite the slight rise, however, Global Insight's Howard Archer noted that housing equity withdrawal in the third quarter was still the second lowest in two years.
Housing equity withdrawal as a proportion of post-tax income meanwhile was also way down on the 5.9 per cent recorded in the first quarter and 6.1 per cent in the fourth quarter of 2006, he added.
He said that housing equity withdrawal "seems set to moderate significantly further".
This will only add to the increasing pressure on consumer spending already coming from modest real disposable income growth, increased debt levels, tighter lending practices and high interest rates, Mr Archer added.