Gross mortgage lending came in at £267bn last year, down 0.4 per cent from £268bn in 2018, according to UK Finance data.
The number of purchase loans to first-time buyers, homemovers and buy-to-let landlords were all lower compared to the previous year.
The biggest drop was among landlords, where loans fell 3.2 per cent to 69,900 from 72,700 in 2018.
Remortgage numbers also fell year-on-year with the sole exception of product transfers, which were up by 1.4 per cent to 1.195m from 1.178m in the previous year.
Prospects for growth in remortgaging markets are limited, both as a result of lengthening deal rates and fewer mortgages on Standard Variable Rates (SVR), UK Finance warned.
At the same time, tougher regulation on affordability has limited the number of consumers lenders can extend credit to, the trade body said.
Affordability issues felt across the country
First-time buyer numbers fell on an annual basis in all but two of the English regions – Yorkshire and Humberside and the West Midlands – with the larger declines mostly seen across the Southern regions.
Homemover numbers dropped across almost all regions.
The buy-to-let market in the North was a bright spot in the market which is also contracting, albeit at a slower rate than seen in 2017 immediately after a round of new regulation hit the sector.
There was also a huge 15.9 per cent jump in the number of possessions in 2019, with numbers hitting 8,000, from 6,900 in 2018.
Eric Leenders, managing director, UK Finance personal finance, said: “Last year saw a slight fall in levels of mortgage activity for home purchases, largely driven by increasing affordability pressures.
“Meanwhile the remortgage market remains competitive, although the shrinking number of customers coming to the end of their fixed rate deals will start to impact volumes in this segment.”
Critics said 2020 could be brighter for the mortgage market after some of the political uncertainties of last year dissipate.
John Goodall, chief executive of buy-to-let lender Landbay, said: “A fall in new mortgage lending is disappointing news for the housing market, but those hoping to see the much-anticipated ‘Boris Bounce’ must wait a little longer.
“We won’t see the impact of any change in decision-making in January until around April, when purchases complete; all eyes will be on the lending levels in Q2 to see whether the decisive election victory has actually impacted sentiment.”