The underlying state of the housing market weakened further in March as buyers grew more wary of purchasing amid rising interest rates, banking data suggested yesterday.

The number of new mortgage approvals for house purchase registered by leading British banks fell by 12 per cent in March compared with a year earlier, reinforcing the impression that the Bank of England’s three interest-rate rises since August are taking their toll on the property market.

It was the fourth consecutive month in which approvals have dropped, the figures from the British Bankers’ Association showed. A total of 75,098 loans were taken out, at a value of £11.3 billion, compared with 85,098 loans a year ago.

Seema Shah, of Capital Economics, said that by adjusting the data for seasonal variations, the figures show the weakest approvals since mid-2005.

Mortgage approvals are seen as a forward-looking indicator of the state of the property market. Current conditions remain robust, however, with Nationwide last week reporting that prices rose by 10.2 per cent in the year to April. The market is expected to weaken further following an interest-rate rise next week, seen as a certainty by City analysts.

Consumer confidence data released yesterday by GfK for the European Commission will encourage the Bank to press ahead with monetary tightening. Its gauge of optimism rose to minus 6, from minus 8, the strongest such figure for six months. The balance of comsumers who thought that now was a good time to make a big purchase rose and perceptions of the general economic situation improved.

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