Total lending was £17.7bn in September, down 10% from August and 42% lower than in September last year.
This was the lowest level of lending for any month since January 2005 and the lowest September figure since 2001.
The CML said it now expected that new lending this year would be just 37% of the level recorded during 2007.
"House prices will continue to fall in the next few months," said the CML's director general, Michael Coogan.
"Weakening consumer demand and ongoing funding constraints will dampen monthly lending figures for the rest of this year and into the first quarter of 2009," he added.
Downward trend
The figures from the CML chime with other evidence that has indicated the UK's housing market is going through its sharpest downturn for many years.
- Property sales fell by 56% in the year to August, according to HM Revenue & Customs
- Prices in the 12 months to September dropped by 12% according to both the Halifax and the Nationwide
- Surveyors reported that, on average, they sold fewer than one property per week each in September
- The number of new mortgages approved but not yet lent was 70% lower in August than a year ago.
Andrew Montlake of mortgage broker Cobalt Capital said the CML's figures were depressingly familiar.
"They reflect the seismic shift we have seen in the mortgage market," he said.
"Despite the bail-outs that have taken place around the world I expect very little change in the mortgage lending figures for the rest of this year, mainly because the mainstream lenders are only accepting 'quality', low loan-to-value business," he added.
Another rate cut?
Despite the Bank of England's recent emergency cut in interest rates, taking its bank rate down from 5% to 4.5%, there is no sign at all of mortgage lending becoming easier or of the downturn in the market easing off.
