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Mortgage lending grew by less than half as much as expected in March, while loan approvals were also slightly below forecast, new Bank of England data shows.

The number of mortgages approved for house purchase increased 4% in the month as buyers continued their return to the market.

A total of 39,230 loans were approved for people buying a home during the month - the highest level in ten months.

But the rise is a steep slowdown from that seen in February, when approvals jumped 18% from the previous month.

Net new mortgage lending rose by £757m in March, less than half the £1.6bn rise expected by analysts and the weakest rise since August 2008.

The growth in total consumer lending - which includes consumer credit - was down to £886m, compared to £1.5bn the previous month.

This was the lowest figure since records began in 1993.

The drop in lending since February could suggest there were fewer housing transactions in the month, or loans for house buying were at a lower value.

Adrian Coles of the Building Societies Association said: "As might be expected at this time of year, mortgage approvals in March rose sharply."

But he added: "Although this may suggest a very slight recovery in activity in the housing market over the next few months the environment nevertheless remains very challenging."

Economists had indicated that the February rise was a sign that housing market activity may finally have turned a corner.

Recent reports have suggested the annual rate at which property prices are falling is showing signs of moderating, and last week the Council of Mortgage Lenders said lending rose by 16% during the month.

But the British Bankers Association provided a dose of realism earlier this week when it said the number of mortgages approved for house purchase had fallen for the first time in four months, slumping by 7% in March.

Economists have warned that any recovery is likely to be gradual and fitful due to rising unemployment and the continuing mortgage drought.