The British Bankers’ Association said that the number of new mortgage approvals fell in August to 64,032, down 9.5 per cent from July and a 21.6 per cent fall from August 2003.

The measure has now fallen for three months in a row, as consumers held back from property purchases discouraged by five interest rate rises.

The total number of loans approved was 201,700, down 4.1 per cent on July, when approvals suffered their biggest fall in a decade. The loans were valued at £15.3 billion, down from £16.3 billion in July.

Alan Castle, UK Economist at Lehman Brothers, said: “This is another pretty negative sign for the housing market through the end of this year and perhaps the beginning of next year.”

Mr Castle said that the figures were consistent with house-price inflation falling from 19 per cent to about 5 per cent by early next year.

David Dooks, the BBA’s director of statistics, said: “It does appear that, having had two months of very weak figures, there’s a certain degree of caution coming into consumers’ minds in terms of making applications for house purchases.”

He said the weak demand was having an effect on prices, noting that the average value of loans for house purchases fell to £112,100 in August, down from £112,900 in July and a record £116,500 in June.

Economists are expecting the Bank of England to announce a similar fall in seasonally adjusted loan approvals tomorrow after weak property figures across the board.

The Council of Mortgage Lenders last week reported a drop in lending during August, while Nationwide said house price growth stalled at just 0.1 per cent during the month and Halifax reported a 0.6 per cent fall in prices.

The BBA added that gross mortgage lending was £16.6 billion in August, down from £18 billion in July but up from £16.1 billion in August 2003. The rise in net lending was £4.4 billion, the weakest increase since June 2002 and unchanged from the figure published last week. The number of remortgages fell by an annual 6 per cent. But consumer credit picked up during the month. Borrowing rose to £8.1 billion on credit cards in August and outstanding net debt rose by £582 million.

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