Mortgage approvals at record low

Just 36,000 new loans were arranged for people moving house during June, 69% fewer than in the same month of 2007 and 12% less than in May, according to the Bank of England.

Mortgage lending also dropped steeply during the month, with net advances hitting a near eight-year low of £3.1 billion.

The figures, which were worse than analysts had predicted, show the continued stranglehold the credit crunch has on the mortgage and housing markets as people struggle to raise the finance they need in order to move house.

They come on the day that a Government commissioned report is expected to warn that there is no quick fix for the problems in the mortgage market, with the log-jam in home loan funding likely to continue for months.

But the Crosby Review, which is being carried out by the former head of the Halifax Bank of Scotland Group, Sir James Crosby, is expected to say funding of home loans should be left to the market, although it may suggest further support from the Government on a temporary basis.

The Bank of England figures showed a fall in all types of mortgage approval, with just 165,000 new loans agreed during June, down from 214,000 just three months earlier.

Within this total, the number of loans agreed for people remortgaging slumped to 84,000, down from 90,000 during the previous month, while approvals for buy-to-let and equity release were also down.

Howard Archer, chief UK and European economist at Global Insight, said: "Yet more very disturbing mortgage data that heightens concerns over the potential depth and length of the housing market correction. The Bank of England data graphically highlights that housing market activity continues to be throttled by stretched affordability and tight lending conditions."

Vicky Redwood, UK economist at Capital Economics, said the latest fall in mortgage approvals pointed to house price falls of at least 20% this year.