Approvals for new home loans in Britain fell to a record low in June, Bank of England data showed on today, pointing to further sharp falls in house prices in the months ahead.
The Bank said mortgage approvals fell to 36,000 last month from a downwardly revised 41,000 in May. That was less than a third of the level this time last year and underscores the extent to which credit conditions have tightened.
Analysts had forecast a reading of 37,000.
"Even if they don't fall any further, these numbers are consistent with house prices continuing to fall quite rapidly," said George Buckley, chief UK economist at Deutsche Bank.
Mortgage lending in June was also weaker than expected, rising by just £3.1 billion, its smallest increase since October 2000.
Consumer credit rose by a weaker than expected £872 million in June, taking overall net lending up by less than £4 billion last month, the weakest gain since February 1999.
After years of double-digit growth, British house prices have fallen rapidly this year as a global credit crunch forces banks to curb lending and insist on bigger deposits before making new loans.
House prices have already fallen around 8 per cent from their peak last summer and some analysts are predicting falls of as much as 30 per cent by the end of 2009, especially as high inflation means the Bank of England looks unlikely to cut interest rates soon.
"In terms of the housing market, things could get worse before the Bank of England cut rates, given its focus on inflation," said Vicky Redwood at Capital Economics.
"We really would have to see the UK going into a full blown slump for them to cut rates in the next few months."