The number of mortgages approved fell to 26,097 in March from 28,024 in February, and were 25.3% lower than in the same month last year.
The BBA says all measures of mortgage lending were slightly weaker in March than in February, with the £8.9bn of gross mortgage lending representing this measure’s lowest level since April 2001.
Meanwhile, the value of house purchase loans approved fell from £3.5bn to £3.3bn and the total value of mortgages approved fell from £7.7bn from £7.3bn.
David Dooks, statistics director at the BBA, says it is unrealistic to expect the mortgage market to recover in a consistent way in the present economic environment.
He said: “Lending to households continues to grow as banks make funds available for individuals who meet their lending criteria but consumer confidence remains fragile.
“Meanwhile, business demand for increased bank finance is subdued as corporates seek alternative funding sources and small businesses operate off cash flow .”
Nicholas Leeming, director of propertyfinder.com, says confidence in the housing market is improving but that continuing restrictions on the supply of mortgages are making life difficult for first-time buyers.
He said: “This stymies the whole market, making housing chains much more difficult to complete. Transaction numbers cannot recover until those entering the market for the first time can access the finance necessary to do so.
“The government’s recent extension of the Stamp Duty holiday will benefit nobody if lenders are not providing mortgages.”
The figures from the BBA contrast sharply with research from the Council of Mortgage Lenders which shows gross mortgage lending climbing 16% from £9.9bn in February to an estimated £11.5bn in March.