Net advances were £1,261 million in May 2007, down from £1,527 million in May last year, the BSA has revealed, while approvals were £4,739 million in May 2007, down from £5,454 million in May 2006.
This downturn in demand is likely to impact on house prices, as more and more homeowners will find it increasingly difficult to sell their properties.
Consequently, they may have to resort to dropping their asking prices.
"It has been a slow start to the summer," confirmed Adrian Coles, director-general of the BSA.
"Building society mortgage lending is down year on year, as the interest rate rises since August last year have started to take the heat out of the mortgage market.
"There is likely to be more subdued lending as the year progresses and the rate rises continue to feed through. Another rate rise would add to the slowdown later in the year and into 2008."
The news follows a similar assessment by the Council of Mortgage Lenders this week.
Julian King, director of fast purchase property company National Homebuyers echoes the comments from the BSA. "The number of buyers has been falling steadily for month" he says.
"The rate increases have caused hitherto untold damages to the property market - we are yet to see the full effect.
"A further rate rise will spell disaster in many areas."
National Homebuyers is the UK's leading fast purchase property firm, guaranteeing to make a cash offer to buy any property quickly for vendors who need a quick sale. They also offer a 'sell and rent back' solution for homeowners who want to release equity in their property.
