This is according to the BBA who also stated that gross mortgage lending of £8.1bn in August was 7.6% lower than a year ago.
High street banks continued to see fairly strong mortgage repayments, so that net mortgage lending increased by £2.5bn in August compared with £3.3bn for the same month in 2009.
August house purchase approvals were weaker than recent months reflecting low demand.
The average value of house purchase approvals (£143,500) fell again in August but was still some 3.8% higher than a year ago.
Numbers of approvals for remortgaging have been slightly stronger in the last two months while those for equity withdrawal have remained at similar levels to July and the previous six months average.
Commenting, BBA statistics director, David Dooks said: "The on-going contraction in net lending to business masks the reality of finance available.
“Bank of England research shows that there is around £25 billion of new lending to businesses quarter on quarter, but this is being more than offset by businesses paying down debt as part of their balance sheet management and cost containment.
"Demand for mortgages continues to be weak despite more properties reportedly coming on to the market. Even with stable or falling house prices the current economic climate makes it unlikely that demand will pick up in the near future."
Nick Hopkinson, director at Property Portfolio Rescue, said: “Today’s data from the major high street banks highlights that last month saw the lowest number of new mortgages offered this year. This is further confirmation, if needed, that the ‘mortgage famine’ is continuing to worsen.
“Even the taxpayer-owned banks are failing to help struggling borrowers who need massive deposits still and a perfect credit score to get any kind of reasonable loan currently.
“Worries over inflation and future interest rates continue to bubble away at the back of borrower’s minds and huge public cuts are very much on the agenda which will make life in ‘austerity Britain’ much tougher for many in the near future.
“Even estate agent surveys are showing asking price falls as reality slowly sinks in amongst even the most optimistic home sellers. Against this backdrop, house prices are going to fall further just as certainly as the autumn leaves will fall off the trees in the next couple of months.”
