"With a stable level of gross lending, but a rising trend in capital repayment, reflecting low interest rates, the difference has gradually narrowed to the point in May where repayment exceeded lending," it said.
Overall, gross mortgage lending of £7.9bn was agreed in May, including remortgage loans, 3.4% lower than a year ago.
According to banking trade body, the BBA, in May, just 30,238 loans were agreed for house purchase in May worth a total of £4,855,000, and remortgages also tumbled to the lowest figure lent for 12 months.
The average house purchase mortgage approvals stands at £165,300.
Howard Archer, chief UK and European economist at IHS Global Insight, said:
"The BBA data reinforces our suspicion that house prices are likely to drift lower over the second half of 2012 and fall by around 3% from current levels."
Archer said the "funding for lending" scheme announced by the Bank of England and the Treasury, could boost the housing market eventually, the danger still remains to house prices given pressures emerging from the Eurozone.
"It is possible that house prices will gain some support from a shortage of properties on the market but this tends to vary markedly between regions as a factor," he said.