The housing market relapsed in February as mortgage approvals for house purchases fell to their lowest level in seven months, industry figures show.
Despite Government attempts to boost the sector, mortgage approvals for house purchases were down 6.3% on a year ago to 30,506 and were also lower than the 31,983 home loans approved in January, the British Bankers' Association said.
Chancellor George Osborne last week announced Help to Buy, a loan and mortgage guarantee initiative, on top of the Government's Funding for Lending Scheme (FLS) which offers discounted loans to banks and building societies if they increase lending.
Matthew Pointon, economist at Capital Economics, said the latest fall means most of the initial boost to mortgage approvals from FLS's launch in August has now been "reversed" and the scheme is "struggling" to make a sizeable impact on home loans.
He added: "Despite the best efforts of the Government, mortgage approvals are refusing to break out of the narrow band they have been in for over three years.
"Although they have cut mortgage rates, banks remain reluctant to lend given the evidence that house prices are overvalued. The Help to Buy scheme is designed to address this hurdle, but it will not start until 2014 and success is far from guaranteed."
He added: "Despite the dip in mortgage approvals at the start of 2013, the majority of recent data and survey evidence suggest that housing market activity has firmed modestly overall in recent months, but it is clearly far from racing ahead."
Gross mortgage borrowing of £7.8 billion was outweighed by repayments of £8.2 billion. The average approval value house price increased to £150,500 from £144,600 in January, but down from £153,000 in December.
The figures also showed companies continue to pay back debt faster than they took out loans, resulting in borrowing by non-financial companies falling by a net £1.8 billion in February.