Gross mortgage lending reached an estimated £17.7bn in September, down 10% from August and 42% from September last year, according to the latest figures from the Council of Mortgage Lenders (CML).

The trade body admitted a seasonal fall is typically experienced between August and September, but acknowledged £17.7bn is the lowest gross lending figure since January 2005 and the lowest September figure since 2001.

Gross lending for the third quarter is estimated at £62bn, down 16% from the second quarter of 2008 and 37% from the third quarter of last year.

Michael Coogan, director general of the CML, said: “The mortgage market is open for business. But weakening consumer demand and ongoing funding constraints will dampen monthly lending figures for the rest of this year and into the first quarter of 2009.

"We estimate gross lending in 2008 will be around £255bn from £363bn in 2007, and net lending of around £40bn, from £108bn billion in 2007."

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