The government's new lending panel meets on Tuesday
The government's priorities for lenders are "conflicting and incoherent", a banking group has said.
Michael Coogan, of the Council of Mortgage Lenders (CML), said mortgage providers were caught in a "tug of war" between boosting loans and stability.
His comments came as the CML said home loan lending had risen 14% in October compared with the previous month.
In a separate survey, the government's own figures showed property prices dipped by 2.5% in the same month.
Mr Coogan said lenders were facing a range of conflicting pressures. These included protecting themselves against future losses, passing on rate cuts to borrowers, and keeping savings rates high.
They also had to assist those facing arrears on their mortgage repayments, as well as helping to maintain economic activity during a downturn.
He was deeply critical of the government for their failure to pick which of these was the most important.
"Current policy objectives are conflicting and incoherent. The government needs to decide on its key priority," the CML's director general said.
"The tug of war with lenders being pulled in every direction at once needs to end."
Shadow Chancellor George Osborne said: "[Gordon Brown] needs to change his bank rescue plan so it starts to rescue the economy, not just the banks, and set up a National Loan Guarantee Scheme to get vital credit flowing to businesses."
A Treasury spokesman said: "As we have said from the start, we took action to stabilise the financial sector so that banks could continue lending to support the real economy.
"While it's important banks are given flexibility to rebuild their capital position, we also need to see a resumption of lending across all banks, and recent announcements by four of the major banks are a welcome first step."
The CML's figures show that the total value of loans granted for house purchases in October was up 10% on September to £5.5bn. This was 57% lower in value than a year ago.
The number of loans granted for house purchases in the UK rose to 39,900, but this was still down 52% on a year ago.
With house prices falling, first-time buyers are not having to borrow as much they did a year ago.
But with banks and building societies keen to lend to "secure" borrowers, first-time buyers are having to find a bigger proportion of the loan as a deposit.
The average deposit of 17% is the highest since 1979, the figures show.
The figures were published at the same time as the government's own housing statistics showed that UK property prices in October were 7.4% lower than a year ago.
Buyers are having to find a large deposit to secure a mortgage
That pushed the average UK house price down to £203,539, the Department of Communities and Local Government (DCLG) said.
Annual average house prices fell by 7.3% in England, 7.8% in Wales, 4.5% in Scotland, and 20.5% in Northern Ireland.
The regional breakdown shows that house prices have fallen the most in the East Midlands and the South West (down 9.5%), but dropped the least in the North West (5.6%).
The highest average house price is in London (£318,831), and the lowest in the North East (£138,575) - a difference of £180,256 between the two.
Earlier on Tuesday, the Royal Institution of Chartered Surveyors said property prices fell further in November, although interest was rising among potential buyers.
David Smith, senior partner at Dreweatt Neate estate agents, said: "If you can take anything positive from the latest depressing house price figures, it's that we're getting closer to the bottom.
"Prices now look attractive but there is a lot of uncertainty."
Meanwhile, the government's Lending Panel meets for the first time on Tuesday.
The group, unveiled in the pre-Budget report, is made up of representatives from banks, the Bank of England and debt advisers, and is set to discuss the squeeze on mortgage lending.