Michael Coogan, CML director general, explained that the figures were a reflection of the uncertainty ruling the housing markets.
"Lenders are uncertain about future sources of funding and the cost of funding, while consumers are unsure about how much further and for how long house prices will continue to decline," he added.
Mortgage lending tends to peak in the summer and the Times has speculated that the major fall in August reflects the lack of confidence about financial security among households.
Recent troubles in the mortgage markets could push the cost of borrowing, which has fallen in recent weeks, back up again, said Eamonn Rice, chief executive of mform.co.uk.
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