Banks approved 31,767 home loans down from 34,219 in July, the British Bankers' Association (BBA) said.
The figures are another indication that the UK property market has stalled.
A raft of data has shown that prices are no longer rising, with separate data from Rightmove showing that average asking prices across the UK had dropped this month.
David Dooks of the BBA said: "Demand for mortgages continues to be weak despite more properties reportedly coming on to the market.
"Even with stable or falling house prices the current economic climate makes it unlikely that demand will pick up in the near future."
The BBA covers all the main mortgage lenders, with the exception of the Nationwide building society.
Meanwhile new mortgage lending by banks in August was nearly eight per cent lower than in August last year.
The number of home loans to house buyers was at its lowest since April last year.