For the second consecutive month mortgage approvals for house purchases have declined, which would indicate that the government’s Funding for Lending Scheme is struggling to make a sizeable impact on mortgage lending, according to Capital Economics.

The number of mortgages approved by banks for house purchase in February 2013 fell by 0.2% from the previous month to 30,506. Mortgage approvals are now at their lowest level since July 2012.

Matthew Pointon, property economist at Capital Economics, said: “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 recently announced ‘Help to Buy’ scheme is designed to address this hurdle, but it will not start until 2014 and success is far from guaranteed.”

Despite the dip in approvals for house purchases, there was a slight recovery in approvals for remortgages as they increased by 0.8% in February from the previous month.