The number of mortgage applications for the purchase of a house fell by 15% to 56,200 in May, the lowest level since December 2023.
Net mortgage lending also fell by 34%, from £4.4 billion in April to £2.9 billion in May, the latest data from the Bank of England shows.
The figure for May was below the previous six-month average of £5.1 billion and the lowest monthly total in a year.
Remortgage approvals fell by 34%, from 51,200 in April to 33,300 in May, but this figure does not include product transfers where borrowers remain with the same lender.
Gross lending fell slightly from £27.4 billion in April to £27.1 billion in May, but remained above the six-month average of £25.3 billion.
Repayments rose marginally to £22.9 billion, up from £22.6 billion in the previous month.
The Bank of England says the difference between gross lending minus repayments and net lending figures is due to differing seasonal adjustment methods.
Damien Burke, head of regulator at Broadstone, said: “The sharp slowdown in mortgage lending and approvals suggests that the surge in activity earlier this year has now faded, with buyers and homeowners taking a more cautious approach.
“While borrowing costs have declined from their recent highs, affordability remains under pressure and many potential buyers continue to contend with higher house prices and broader pressure on the cost of living.
“For lenders, the changing outlook highlights the importance of integrating forward-looking affordability assessments that better reflect real-world borrower behavior and lifetime income patterns.
“As caution increases, these more personalized models could help maintain housing demand in the coming months.”
Nathan Emerson, CEO of Propertymark, said: “A decline in net mortgage lending and a decline in mortgage applications reflects the continued caution that many households are taking on significant financial commitments.
“Affordability remains an important consideration for many buyers, and any uncertainty around household finances or borrowing costs could impact purchasing decisions.
“Despite this, there remains an underlying demand from people wanting to move.”
Zoopla managing director Richard Donnell said: “The average mortgage rate reached a level of 5% in April. After starting the year at 4%, this has led to a decline in mortgage approvals for home purchases as buyers take a wait-and-see approach to mortgage rates, which are now falling again.
“The sales we agreed on this year appear to be lower than we expected at the start of the year, although last year saw a very weak second half as budget uncertainty impacted sales.
“The outlook for the home sales market in the second half of the year depends on how far mortgage rates fall.”