Mortgages for August at lowest recorded level

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The British Bankers' Association today said that in August only 21,086 mortgages were approved - the lowest figure since records began in 1997. It represents a 64 per cent drop on August last year.

City economists described the figures as "dismal" but it raised hopes that the Bank of England will be forced to cut interest rates soon.

Buyers have been put off by a shortage of available mortgages, demands for hefty deposits, fears over jobs and falling house prices.

Prices have already dropped by more than 10 per cent since last year's peak and experts warn they could fall another 20 per cent over the next 12 to 18 months before the market bottoms out.

Estate agents yesterday reported that they are selling an average of five properties a month. The Government this month raised the stamp duty threshold from £125,000 to £175,000 in an effort to revive the housing market.

However, Allan Monks of JP Morgan Chase said today's "disappointing" figures underlined how little power the Government has to bail out the housing market. "The measures announced earlier this month look unlikely to prompt a meaningful revival in house purchase activity," he said.