The number of loans granted for home purchases slumped by 9.5 per cent last month, offering further evidence of a property slowdown and hardening expectations that interest rates are near their peak.

The British Bankers' Association said that 64,000 mortgages were granted to homebuyers in August compared with 70,700 in July. Year on year, the decline is 21.6 per cent.

By value, the drop in mortgage approvals was 10.1 per cent over the month and 16.5 per cent over the year.

The figures follow a stream of evidence of a slowing housing market, with Hometrack on Friday revealing price fall of 0.3 per cent in September after 0.1 per cent declines over the previous two months.

David Dooks, the BBA director of statistics, said: "A further weakening in the number of loans approved, particularly for house purchase and equity withdrawal, in August indicates that households' appetite for secured borrowing is moderating."

He added that a slowdown in overall net mortgage lending, which grew at its slowest pace since June 2002, looked "set to continue in the next couple of months".

Howard Archer, the Global Insight economist, said that the statistics supported the view that "the housing market slowdown is becoming more marked and prices will moderate further over the coming months".

He added: "Given that recent data and survey evidence has increased the [Bank of England's] concern that the housing market could suffer an abrupt correction, the data add to the case for no more interest rate hikes this year."

Barclays Capital said that today's figures were, nonetheless, stronger than many had expected.

"This adds weight to the idea that the housing market is slowing gradually, rather than dropping off a cliff," Barclays Capital said.

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