Figures from the Bank of England showed the number of mortgages approved for new house purchase fell sharply from 50,544 to 44,192 across the month.

This was well below expectations for a figure of 49,000.

Net mortgage lending was down £0.4bn compared to consensus forecasts of a rise of £0.4bn.

The broad measure of money supply – known as M4 – fell by 1.3% month-on-month in June, causing the annual growth rate to drop from -4.7% to -6.1%.

Analysts said the slump in the figures was probably exaggerated by the lost working day for the Diamond Jubilee but the low level of consumer confidence and recent tightening of credit conditions suggested mortgage approvals were likely to remain depressed in the second half of this year.

Samuel Tombs, UK economist at Capital Economics called the numbers “feeble”.

Tombs said: “June’s money and lending figures suggest that the financial sector is acting as an increasing drag on the economic recovery.”

The Bank’s numbers echoed figures from property research firm Hometrack, which showed that in July house prices fell for the first time in 2012.

Commenting on the latest figures Barclays released this: “While the data suggest that such measures [Funding for lending scheme] are necessary, we think the current policies are likely to have only a limited impact.

“The success of such measures will depend on the take-up by lending institutions, and with one of the major UK banks announcing it will not take part, the degree of participation remains to be seen.

“Furthermore, banks’ lending strategies are unlikely to change much, in our view, as they remain under pressure to maintain large liquidity buffers and increase their capital ratios.

“Finally, we think that credit flows are low as a result of demand as well as supply measures. As long as households and companies remain focused on paying-off debt and the economic outlook remains uncertain, we do not expect demand for credit from these sources to pick-up significantly.”