Mortgage lending fell by 12% in September - more than double the 5% seasonal decline that is usually expected at the end of the summer, new figures show.

The Council of Mortgage Lenders said the £29.9bn lent during the month was also only 2.5% higher than the figure for September last year, the slowest annual growth rate for two years.

The figures were backed up by ones from the British Bankers' Association, which also showed a fall in mortgage lending between August and September.

The group said lending by the major banks increased by £5.8bn in September, down from £6bn in August, but slightly above the recent average of £5.6bn.

Michael Coogan, director general of the CML, said: "We have been expecting a slowdown in monthly lending levels in line with interest rate rises.

"In the coming months, we expect to see monthly lending levels dip below their 2006 levels for the first time this year as rate effects are exacerbated by the recent liquidity problems in the mortgage market."

Mortgage lending by building societies increased slightly in comparison with the previous month, with net lending of £656m in September, although it was down year-on-year, the Building Societies Association (BSA) said.

The BSA's director general Adrian Coles said: "It is clear that the impact of higher interest rates is continuing to dampen the housing market, and societies are continuing to ensure that they are lending only to those who can afford to borrow."

The subdued lending figures may point to a slowdown in the housing market in the face of higher interest rates.

Britain's biggest mortgage lender Halifax said house prices fell by 0.6% during September, although it added that a mixed pattern of monthly price rises and price falls is a typical feature of a more subdued market.

And other house price indexes have shown that price growth still remains relatively robust, although the recent introduction of Home Information Packs is thought to have distorted figures slightly.

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