American mortgage applications have fallen to their lowest level for a year, offering more evidence that the US housing market has ground to a halt.

According to America’s Mortgage Bankers’ Association, its application index showed a 7.6 per cent slide in home loan requests in the week to December 21, the lowest reading since the end of last year.

The numbers are even more surprising because borrowing costs in the United States have fallen substantially since September and tightened lending criteria encourages some borrowers to apply numerous times for a mortgage to get one approved.

Demand for both home purchases and remortgaging fell during the past two weeks, with total loan applications at the beginning of December down almost 20 per cent.

Falling demand would indicate that many homeowners are either unable to sell their existing homes or that the sliding value of their property has ruled out refinancing options.

Gregory Miller, chief economist at SunTrust Banks, said: “Maybe late in 2008 we’ll see some markets beginning to recover, but for the nation as a whole, I think the end of 2008 is probably as optimistic as one would want to get. More likely, we’ll be well into 2009 before we start describing this housing cycle as ‘in recovery’.”

Property prices suffered their biggest annual drop on record in October, according to the Standard & Poor’s/Case-Shiller national index published this week.

Elsewhere, statistics from the US Labour Department indicated that the American jobs market is deteriorating. Last week more people had signed up for unemployment benefits, up by 1,000 to 349,000. Wall Street had been expecting the numbers to fall to about 340,000.

Orders for durable goods provided more reason to be gloomy. Orders for goods that are expected to last at least three years increased by 0.1 per cent last month, compared with expectations of a 2.2 per cent rebound. A number of Wall Street economists expect the US to slide into recession next year, with growth thought to have slowed to 1.5 per cent in the last three months of 2007.

The Dow Jones industrial average in New York closed down 192.10 points at 13,359.60.

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