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According to the BSA, gross lending amounted to £3.23m in May, compared with £4.59m in the same month the previous year. Meanwhile, net lending was just £125m in May 2008 compared to £1.26bn in May 2007.

Adrian Coles, director-general of the BSA, said: "With 74 per cent of respondents to the BSA's Property Price Tracker survey expecting property prices to fall over the next year, it is no surprise that demand for new mortgages remains low, with net lending amounting to only £125m.

"It is important not to read too much into one month's very low figures. However, the figures do reflect the considerable adjustment in housing market activity now being experienced. We expect activity to remain at low levels for some time."

At the same time, the savings market has boomed, with with societies attracting savings inflows of £853m in May 2008 - the highest May figure since 2002. This figure also compared with £608m in May 2007.

Coles added: "Yet again, savers have responded to the uncertain economic outlook by choosing the safety of a building society over the volatility of the stock market."

However, net receipts into cash ISAs were just £272m in May, compared with £404m in May last year.