Hopes of a strong resurgence in the property market have taken a slight dent as
mortgage lending fell back by 2% during May.
A total of £10.3bn was advanced during the month, down from £10.5bn in April and 58% lower than in May last year, according to the Council of Mortgage Lenders.
The CML said the decline in overall lending was likely to have been driven by a further fall in the number of people remortgaging.
This has probably offset a slight pick up in advances to people buying a new home.
Figures for April, the latest month for which a breakdown is available, showed that only 34% of advances went to people who were remortgaging, the lowest proportion since December 2007.
At the same time, lending to people buying a property jumped to 43% of the total, a level last seen in August 2007.
Record low interest rates are putting many people off remortgaging, as their lender's standard variable rate, which they revert to at the end of a fixed-term deal, is often lower than the remortgage rates available.
The tighter lending criteria being employed by banks and building societies also mean that many homeowners are struggling to qualify for a new mortgage.
This is particularly true for those who have seen the equity they have in their property eroded by house price falls.
CML economist Paul Samter said: "Underneath the headline gross lending figure, it's likely that a moderate improvement in house purchase lending in May has been offset by very low remortgaging volumes as borrowers stay with existing deals.
"While recent signs from the housing market have been more encouraging, we do not anticipate a significant recovery in activity in the coming months.
"Lending volumes appear to have stabilised at extremely low levels, but the weak labour market and lenders' limited access to funding will constrain activity for some time yet."
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