UK mortgage approvals slumped to a record 11-year low last month, adding to evidence that companies are tightening their lending criteria and cash-strapped borrowers are reluctant to take on large debts.

Figures from the British Bankers' Association (BBA) today show the number of home loans granted by lenders fell from the previous month's 43,944 to 42,088 approvals in December — the lowest since 1997.

The record fall is 22 per cent below the six-month average and 37.8 per cent below December 2007.

Gross mortgage lending also declined from £16.5 billion in November to £15.1 billion.

Howard Archer, the chief UK and European economist at Global Insight, said: "The December BBA mortgage data provide yet further evidence that housing market activity is now being substantially undermined by both stretched affordability and tightening lending practices.

"This adds to the already intense pressure on the Bank of England to cut interest rates in February, and to enact significant further reductions thereafter."

Interest rates have risen five times since August 2006, but the Bank of England cut rates by a quarter of a point to 5.5 per cent last December and voted 8 to 1 not to make a further reduction this month.

Lenders have become much more cautious about whom they lend to after the emergence of the sub-prime mortgage crisis in the US, where companies granted home loans to individuals with a poor credit record.

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