The number of home buyers in London dropped by nearly a fifth in the first quarter compared to a year ago, according to the Council of Mortgage Lenders (CML).
Home buyers took out 16,700 loans in the first quarter, down five per cent from the previous quarter and 19 per cent on the first quarter in 2016.
A total of £5.4bn was borrowed for house purchases, down three per cent quarter-on-quarter and 22 per cent year-on-year.
The CML blamed affordability issues and supply for the fall, adding that winter months generally bring a dip in activity.
First-time buyers in the capital took out 10,000 loans in the first quarter, a drop of five per cent quarter-on-quarter and three per cent year-on-year. They typically borrowed £254,300 (£133,000 in the UK overall), down from £256,000, the CML said.
The average household income in the capital was £64,100 (£40,000 in the UK overall), unchanged from the previous quarter.
However, remortagage activity in London hit an eight-year high due to low interest rates.
Remortgage activity totaled £4.2bn, up 13 per cent on the fourth quarter and seven per cent compared to the same quarter last year. This came to 16,700 loans, down five per cent quarter-on-quarter and 19 per cent compared to a year ago.
Paul Smee, CML director general, said: "Home buyer activity in London has fallen for the second quarter in a row. A traditional seasonal dip in activity in the winter months is expected, but it has been more pronounced in London compared to the UK overall, as persisting supply and affordability issues continue exerting ongoing restraint on growth. We do expect activity will pick up as we go forward into the summer months.
By contrast, remortgage activity was at an eight-year high in London. Attractive mortgage deals aided by low interest rates appear to have sparked a resurgence in activity that has seen consecutive growth year-on-year every quarter for three years.