The banks’ net mortgage lending (gross lending minus mortgages repaid) grew by 0.6% in the year to August, it found. Mortgage approvals for house purchase showed an upturn from July, though in August were 13% lower than a year ago.

There were 30,533 homeloans approved for house purchases in August, half the level seen in the same month in 2006 and 2007.

Numbers of remortgaging approvals were some 33% lower than in August 2011 and approvals for other secured lending were 28% lower.

The BBA said over time the Funding for Lending Scheme will improve lending conditions, though it is too early to measure any impact yet.

David Dooks, BBA statistics director said:

“People are acting conservatively in this weak economic environment, maintaining debt repayments and building up deposits. Household mortgage approvals are improving slightly but unsecured borrowing continues to be subdued.

“Weak trading conditions persist so companies may well remain reluctant to borrow for investment or expansion in these conditions.”

Martin Stewart, director of independent mortgage broker, London Money added:

“August, to quote Dylan Thomas, was as quiet as a mouse with gloves.

“The Olympics and Paralympics poured water on what little activity there was. House purchase levels were painfully low. It’s hard to imagine it, but activity levels are significantly down on a year ago. For a number of months now, the mortgage and property markets have been in reverse.

“The Funding for Lending scheme has given lenders more confidence, and is driving competition, but that competition is still at lower loan-to-values. The scheme has had no impact whatsoever on house purchase levels and has failed to ignite consumer confidence.

“Some lenders, such as Coventry and Newcastle, are being far bolder than others. Coventry is currently offering some very competitive rates at 85% LTV while Newcastle has some decent arrangement fee-free deals at 90%. But the majority of lenders are still too scared to come out to play. Until there is more diversity at 90% LTV, the market doesn’t have a chance.”