The number of mortgages approved fell to 64,212 in August, down from 66,100 in July, data published by the Bank of England this morning showed.
The figure fell below analysts' expectations of 65,000, suggesting the housing market is cooling faster than thought.
Does this mean Bank of England governor Mark Carney's Mortgage Market Review is having the desired effect? In April, the Bank introduced measures designed to reduce household indebtedness, which meant mortgage customers couldn't borrow more than 4.5 times their income, and forced them to undergo a "stress test" to ensure they will still be able to make payments if interest rates rise three percentage points.
The measures had an abrupt effect on house prices: figures published by the Office for National Statistics at the end of August showed prices grew 10.2 per cent in the year to June, down from 10.4 per cent in May.
Howard Archer, chief European economist at IHS Global Insight, said the falling figures suggest "there has been some underlying moderation in housing market activity".
We see house prices rising by around 6% overall in 2015. Slowly rising interest rates, more stretched affordability ratios (due to the marked rise in house prices) and tighter mortgage lending as a consequence of the MMR and the Bank of England’s macroprudential measures announced in June are seen having some restraint on the housing market in 2015.
In addition, it is likely that more houses will come on to the market. However, appreciable support to housing market activity and prices is likely to come from higher employment and improving earnings growth. In addition, there will still be a relative lack of available properties, which remains a long-term structural problem exerting upward pressure on house prices.