This marks a 20% drop from the £4.4bn figure in September, as was reported by the Council of Mortgage Lenders.
This is the lowest total since June 2013 and the worst October since 2010, when the UK was in recession.
Remortgage loan volumes also fell by 21% year-on-year to October 2014, with last month’s total of 23,505 dropping from the 29,700 recorded in October 2013.
Andy Knee, chief executive of LMS, said: “Despite signs of resurgence in the market last month that remortgaging had taken a turn for the better, this month saw that assumption come crumbling down with the worst October we’ve experienced since during the midst of the recession.
“Even with the competitive rates on offer, customers appear hesitant to take advantage of these perhaps, in part, due to the increased regulation of MMR or the introduction of loan to income caps.
“Recent months have witnessed evidence of a wider cooling in the market as house price growth and loan approvals slow but it awaits to be seen whether this is a permanent trend, or simply a slowdown in the lead up to Christmas.”
The value of the average remortgage loan has fallen to £149,715, 6% lower than last month’s total and just 0.3% higher than the £149,282 recorded in October 2013.
The remortgage market share now equates to 19% of the total market, 5% lower than last month and down from 24% in October last year.
Knee added: “Hopes for greater stability in 2015 across the remortgage market are likely to be thrown off course by uncertainty ahead of the election, changing attitudes towards a base rate rise from the Bank of England and, potentially, the impact of greater economic instability in the Eurozone on the UK market.
“That income has dropped slightly this month, after several months of increases, and repayment as a percentage of income has increased to over a fifth of income is a worrying sign this close to Christmas.
“It is a time of year when finances face increasing pressure.
“Remortgaging to reduce your monthly payments by taking advantage of the competitive offers available at the moment could provide some welcome relief.”
