Net mortgage lending plunged by 34% from £4.4bn in April to £2.9bn in May, the latest Bank of England data reveals.

May’s figure was below the previous six-month average of £5.1bn and the lowest monthly total for a year.

Approvals for remortgages also plummeted by 34%, from 51,200 in April to 33,300 in May, but the figure does not include product transfers where borrowers stay with the same lender.

House purchase approvals fell by 15% from 66,000 in April to 56,200 in May.

Gross lending decreased slightly to £27.1bn in May, from £27.4 bn in April, but remained above the six-month average of £25.3bn.

Repayments increased marginally to £22.9bn, from £22.6bn in the previous month.

The Bank of England says the difference between gross lending minus repayments and net lending figures is due to varying seasonal adjustment methods.

Broadstone head of regulatory practice Damien Burke says: “The sharp slowdown in mortgage borrowing and approvals suggests the surge in activity earlier this year has now faded, with buyers and homeowners taking a more cautious approach.

“While borrowing costs have eased from their recent highs, affordability remains stretched and many prospective buyers continue to contend with elevated house prices and wider cost-of-living pressures.

“For lenders, the changing outlook highlights the importance of integrating forward-looking affordability assessments that better reflect real borrower behaviour and lifetime income patterns.

“As caution rises, these more personalised models can help to sustain housing demand over the coming months.”

Propertymark chief executive Nathan Emerson says: “A decline in net mortgage borrowing and a decrease in mortgage approvals reflects the continued caution many households are exercising when making significant financial commitments.

“Affordability remains a key consideration for many buyers, and any uncertainty around household finances or borrowing costs can influence purchasing decisions.

“Despite this, there remains underlying demand from people looking to move home.”

Zoopla executive director Richard Donnell says: “Average mortgage rates hitting 5% in April, having started the year at 4% has led to a decline in mortgage approvals for home purchase as buyers adopt a wait-and-see approach to mortgage rates which are now declining once again.

“Sales agreed over the year look set to be lower than we expected at the start of the year although last year saw a very weak second half as Budget uncertainty impacted sales.

“The outlook for the housing sales market in H2 depends on just how far mortgage rates fall back.”