The UK's mortgage market has slumped to levels last seen more than two years ago as the effects of a double-dip recession take hold, according to new research.
House purchase loans fell 8% year-on-year last month to 48,913 - the third worst August for almost 20 years, chartered surveyors e.surv found.
There was a sharp fall in lending to borrowers with a deposit of less than 15% - often first-time buyers - the survey showed, as banks toughened their lending criteria.
Just one in 10 of all mortgages were to those with a low deposit in August, compared to almost one in seven in January.
E.surv's Richard Sexton said the data show the market is slipping towards the "dismal" levels last seen in 2010.
"Much of the progress the mortgage market has made since summer 2011 has been unravelled by the double-dip recession," he said.
"This is largely thanks to a fall in the number of high-loan-to-value mortgages banks are willing to grant.
"Credit conditions for banks have become painfully tight, and they've responded by toughening criteria on mortgages aimed at borrowers with small deposits."
Although the Olympics and poor summer weather could also be partly responsible for the drop, he added.
The figures mark the third consecutive month that lending has fallen on an annual basis, the research showed.
The UK economy is like to remain "stagnant for the foreseeable future", Mr Sexton said, adding that the fall in lending is in response to the increasingly tough economic landscape.
"Lenders have lost a great deal of confidence in the Government's economic growth plan," he said.
"Instead of increasing their exposure to high loan-to-value mortgages while the economy is in such a tender state, they are focusing on protecting their balance sheets against any more nasty surprises."
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