New mortgage approvals fell towards an all-time low in February as lenders tightened the criteria on granting new home loans, placing more pressure on the Bank of England ahead of its interest rate-setting meeting next week.

Figures from the Bank of England show that new mortgage approvals fell from 74,000 home loans granted in January to 73,000 in February - below a six-month average of 87,000 and only marginally above a record low of 72,000 in December last year.

Compared to February 2007, new mortgage approvals fell by 39.2 per cent.

Net mortgage lending in February was flat, at £7.4 billion, but just above an expected £7.3 billion.

Howard Archer, chief UK and European economist at Global Insight, said: "The weak mortgage approvals data from the Bank of England confirms that the housing market was already under major pressure from the dangerous combination of stretched affordability and tighter lending conditions even before the recent escalation of the credit crunch."

Mortgage lending is slowing as a number of banks increase the rate they charge borrowers or, like First Direct, temporarily stop offering home loans due to unprecedented demand.

In contrast, unsecured lending rocketed by £2.4 million in February, the highest growth rate since October 2002 and above the £900 million rise in January.

Borrowers appear to be eschewing secured borrowing in preference for credit cards and loans. The rate of money homeowners withdrew from their houses fell in the fourth quarter of 2007, from £10.8 billion in the previous three months to £7.3 billion.

Bank of England figures show that while the number of remortgages fell from 118,000 in January to 111,000 the following month, February's figure is above November and December, and ahead of the six-month average of 100,000 remortgages.

The Bank of England's Monetary Policy Committee (MPC) meets next week to decide whether to cut or hold the UK interest rate which is currently 5.25 per cent.

The MPC is juggling whether to keep the rate unchanged due to rising inflation which is currently 2.5 per cent, above the Bank's 2 per cent target, and increased unsecured lending or cut borrowing costs to stimulate a slowing housing market and to help loosen tighter lending criteria.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive