May saw mortgage approvals hit a record low of just 9,300, according to Bank of England figures.
This was almost 90% below the February level and around a third of their trough during the financial crisis in 2008.
Approvals for remortgage have also fallen, to 30,400; this fall was a little less sharp and they are 42% lower than in February
Rob Barnard, director of intermediaries at Masthaven Bank, said the figures were unsurprising.
He said: “The market will take a while to completely bounce back and so it’s no real surprise to see lending levels in May considerably down against the historic average.
“However, Masthaven’s recent broker survey revealed 71% of intermediaries are confident about the market’s longer-term prospects.
“The combination of pent-up buyer demand and the appetite of lenders to lend will drive a resurgence in the market later in the year.
“Masthaven has remained open for business during the crisis. We will continue to work with our intermediary partners to ensure borrowers have access to the finance they need as the country returns to some form of normal.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, added: “COVID-19 has had a devastating impact on the mortgage and property markets, so it is no surprise that lending was weak in May, with approvals for house purchase falling.
“With lockdown meaning that lenders were unable to send valuers out to physically view properties, the number of mortgages approved fell considerably.
“Lenders were kept busy processing mortgage payment deferrals and trying to get to grips with staff working from home rather than call centres, meaning it was far from ‘business as usual’.
“However, lenders remain keen to lend and awash with cash to do so. With the backlog of valuations clearing now that surveyors can once again carry out valuations, we expect mortgage approvals to pick up.
“Mortgage rates remain extremely competitive and lenders are slowly returning to higher loan-to-values, which is good news for first-time buyers in particular.”
Franz Doerr, founder and CEO of Flatfair, said: “With the number of mortgage approvals falling far short of expectations and setting a new low in May, it is clear that the housing market has not snapped back to pre-pandemic levels.
“The consequence of this will be to accelerate the recent trend of Britons renting for longer than ever before.
“The rental sector needs to continue its work to make life better for tenants, both in terms of being able to rent the kinds of properties they want easily, and also in offering homes that are fit for a new wave of remote working and social distancing.”