New commitments fell 10 per cent from £40bn in Q2 to £36bn last quarter.
The value of outstanding loans totalled £1.23trn, rising marginally from £1.2trn in Q2.
The average interest rate on new advances increased from 3.78 per cent to 3.89 per cent. There was an increase in the rates for both variable and fixed rate lending.
Lending for house purchases accounted for 66 per cent of new advances, rising from 62 per cent in the previous quarter.
The proportion of new lending done at 90 per cent loan-to-value remained at 2 per cent for the third consecutive quarter.
The proportion of loans to borrowers with an impaired credit history remained at 0.3 per cent, also for the third consecutive quarter.
In Q3, there were 35,900 new arrears cases. This represents a 4 per cent increase on the 34,400 in Q2.
The total number of accounts in arrears at the end of the quarter rose 2 per cent to 303,200, up from 296,500 in Q2. This was 7 per cent less than the 324,300 in Q3, 2011.
The proportion of residential loans in arrears rose marginally from 2.45 in Q2 to 2.46 in the third quarter.
The number of new repossessions fell 2 per cent to 8,521 from 8,720.