Official figures have shown that approvals for new home loans in Britain plummeted in May to a record low, in a sign that house prices will fall sharply in the coming months.
The Bank of England said mortgage approvals fell 28% from April to 42,000. Analysts had predicted 51,000.
Approvals were 64% lower than a year ago in May as mortgage lenders have tightened up borrowing terms in the face of funding constraints caused by a global credit crunch.
UK house prices have already been falling at monthly rates not seen since the housing market crash of the early 1990s and the very weak approvals numbers suggest the downturn is only just beginning, especially as interest rate cuts are not likely.
Actual mortgage lending posted its weakest rise since March 2001, rising by £4.07 billion. In percentage terms, mortgage lending grew by just 0.3%, its weakest monthly rate in nearly 12 years.
