Banks approved fewer mortgages in 2010 than at any time over the past 11 years.
Government ministers have called a meeting with mortgage lenders to discuss the record low mortgage approval figures.
Mortgage approvals fell by 10% in 2010, according to figures revealed by the British Banker's Association (BBA).
Members of the BBA approved just 400,000 mortgages in total with lending in December reaching a figure of just £880 million, marking the second lowest level of approvals in an 11 year period.
The Association said: "Mortgage demand was weak throughout the year. Unsecured credit demand was also weak during last year, with net lending reducing by £2bn as households adopted a lower appetite for credit due to the uncertain environment for employment and the economy".