The housing slowdown worsened last month as the number of mortgage approvals fell by 14 per cent, the British Bankers' Association reported.

Members of the BBA recorded 52,685 approvals for house purchase in September, down from 61,051 the previous month and 27 per cent lower than a year ago. It was the smallest number of approvals for any September since 2000.

Approvals are the key measure of activity in the property market and a decline is seen as an early indicator of a slowdown in house prices.

Peter Newland, of Lehman Brothers, forecast that the Bank of England would show a decline in approvals from 109,000 to 100,000 next week in its official record of the whole market.

Mr Newland said: "All in all, we expect mortgage demand, and other indicators of housing activity, to slow further in the coming months, consistent with quite a sharp slowdown in house price inflation in 2008."

David Dooks, the BBA's director of statistics, said: "“Lower amounts of new mortgage lending and fewer loans approved for house purchase signal a weaker outlook for the mortgage market, particularly if loan supply reduces in the aftermath of the recent financial markets difficulties and borrowing costs remain at current levels.

"Despite reports of stronger retail sales, card spending was low in September, but so were repayment levels, giving rise to a small increase in net borrowing alongside a similar rise in loans and overdrafts, but overall demand for unsecured borrowing remains very weak.”

Surveys by the Royal Institution of Chartered Surveyors have suggested that house prices are already falling at their fastest pace in two years.

Earlier this week Kate Barker, a member of the Bank of England's Monetary Policy Committee, said that house prices appeared to be overvalued and could suffer from a change in people's expectations, amplified by uncertainties in the buy-to-let sector.

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