Mortgages dive further as buyers keep their distance

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The Bank of England reported 47,185 loans for house purchases approved in October, the lowest since February.

Lenders advanced a net £1 billion over the month, but experts warned this was still well below pre-recession peaks.

Hetal Mehta, UK economist at Daiwa Capital Markets Europe, said: "The housing market has been turning for a few months as consumers remain very cautious in the face of the looming fiscal retrenchment.

"Real wage growth is in negative territory and unemployment remains high."

The news came as property intelligence group Hometrack warned of a fifth successive month of house price falls in November amid faltering demand from would-be buyers.

The average cost of a home in England and Wales fell by 0.8% during the month to stand at £155,000, following a 0.9% slide in October, Hometrack said.

Hometrack said property values were likely to remain under pressure in the near-term, but the tightening in supply should help limit price falls to just 2% by the end of next year.

Richard Donnell, director of research at Hometrack, said: "The seasonal slowdown in the housing market has kicked in a month early with demand for housing falling at the fastest rate for 23 months. This mirrors similarly weak data on levels of mortgage lending announced earlier this month.

"Concerns over the economic outlook on the back of recent spending cuts together with widespread expectations that house prices are set for a period of retrenchment, are driving the continued weakness in demand.

"It is inevitable that this trend will continue as we move into the new year from both a seasonal and sentiment perspective."