Remortgage approvals also dipped from 30,799 in April to 29,244 in May.
Gross lending reached £12.2bn in May up from £11.6bn in April but repayments rose from £11.4bn in April to £11.7bn in May bringing the rise in total lending to just £0.6bn compared to the previous six month average of £1bn.
Paul Diggle, property economist at Capital Economics, said: "May’s decline in mortgage approvals was surely related to the fact that lenders are once again reducing the availability of mortgage credit. Against a backdrop of renewed recession in the UK and the escalating crisis in the euro-zone, mortgage approvals are unlikely to break out of their rut anytime soon."
Meanwhile Simon Rubinsohn, RICS chief economist, said the figures highlighted the increasing pressures on the UK real estate sector in the face of worsening euro crisis.
He pointed to poor construction data also out this morning showing that the June CIPS Construction survey posted its worst reading since December 2009.
Rubinsohn added: "Meanwhile, the drop in the number of mortgages approved in May according to the Bank of England is consistent with a slowdown in transaction activity in the wake of the expiry of the stamp duty holiday on properties valued at less than £250k.
"The dramatic turnaround in sentiment in the construction sector signalled by today’s number brings the CIPS indicator closer to the trend signalled by official data and is indicative of the failure of government policy to match rhetoric on infrastructure and other development with action. Relying on funding from institutions to deliver the necessary finance to support the programmes set out in the national infrastructure strategy is clearly not working and needs to be backed up by public monies if construction really is going to be a centrepiece of the recovery strategy.
"Given the worsening global environment, the likelihood is that both the construction and residential data will remain subdued over the coming months. A further batch of quantitative easing is likely to be announced later this week by the Bank of England but we are not convinced this will on its own provide much relief for either sector."
