The 28 per cent fall in home loans was the fastest on record, said the Bank of England.
Only 42,000 mortgage applications - a third of the number agreed in May last year - were given the go-ahead. The amount loaned hit a seven-year low of £4.07billion.
 
There was more bad news for home owners with the revelation that even though £30billion worth of fixed-rate mortgage deals will end this month, half of those affected have not yet found themselves another loan.
Only one in six has got a new deal but they say their new monthly payment will be so much higher they fear they will struggle with repayments.

Louise Cuming, head of mortgages at price comparison website moneysupermarket. com, said: "Many home owners will be plunged into a borrowing underclass when their fixed-rate deal comes to an end.
"Banks are cherry-picking customers, leaving many people unable to find affordable deals."

Property economists Capital Economics described the reports as "dire", warning that the drop in mortgage approvals pointed to house price falls of 15-20 per cent this year.
The Shadow Chief Secretary to the Treasury, Philip Hammond, said: "Millions of families are now being forced to abandon their dream of home ownership.

"The credit crunch is hitting hard-pressed families already struggling with rising borrowing costs, stagnant earnings and soaring food and fuel prices.'' Nicholas Leeming, director of propertyfinder. com, said:
"Housing transactions have seized up, not because people don't want to move but because the lenders won't play fair with mortgages."

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