Home lending has collapsed to its worst level since the global financial crisis as households shy away from taking on more debt despite house prices showing signs of bottoming out.

Official figures show the value of housing finance issued in May fell 2.4 per cent and was down year-on-year by close to 21 per cent, the worst result in a decade.

Lending to owner-occupiers, the largest group of borrowers, has collapsed to 10-year lows following a 2.7 per cent drop over the month.

The figures show Australians are focused on deleveraging rather than spending. Credit:Paul Jeffers

Housing investors were slightly less gloomy than owner-occupiers, with loans to the sector registering a smaller downturn.