According to its latest data, there were 33,103 applications approved for mortgages in February, down from 37,977 in January.
The BBA said that last month, house purchase approvals dropped back to more normal trend levels as demand from buy-to-let investors and first-time buyers, seeking to buy before the Stamp Duty exemption ends tomorrow, fell back.
The number of re-mortgaging approvals was at its lowest level for 13 years at 18,147, down from 20,635 in January.
The BBA said gross mortgage lending stood at £7.9bn last month, a 1.9% drop against February last year.
David Dooks, statistics director at the BBA, said: “Businesses and households continue to be cautious about their finances in the face of difficult economic times and this shows up in an reluctance to take on new credit, or where possible, seeking to pay back bank borrowing.
“Confidence will be helped in the coming months by official schemes to support the mortgage market and stimulate business demand for credit.”
In separate research on the rental market, BM Solutions revealed that with the average monthly rent climbing to £716 in 2011 from £682 in 2010, buy-to-let investors achieved a rental yield of 6.1% in 2011.
BM Solutions said that while 2011 rental yields were marginally lower than the 6.2% recorded last year, they remained buoyed by continued rental increases across the UK.
Phil Rickards, head of sales at BM Solutions, said: “There is a very healthy demand for rental properties across the UK right now, which in part may be driven by the costs associated with buying a home.
“Average gross yields on a buy-to-let property have been just over 6% for the past two years, driven by growth in rental values.
“However, with house prices likely to remain broadly flat again this year, buy to let landlords can again expect little capital gain on their investment in 2012.”
