The rate of UK mortgages approvals fell by 16 per cent in October as the Government's controversial Home Information Packs discouraged sellers from putting their homes up for sale and higher interest rates put off buyers taking out home loans.

The British Bankers' Association (BBA) said today the number of mortgages approved for home-buyers fell from 54,000 in September to 44,100 last month — a 37 per cent slump on October last year.

The BBA said that the sharp fall was the delayed result of five interest rate increases since August 2006, which are now impacting the housing market.

Also, the BBA said that the introduction of Home Information Packs, faltering confidence following the Northern Rock crisis and the global credit squeeze had also taking the steam out of UK housing.

The total value of mortgages approved fell from £18.5 billion in September to £15.1 billion in October and 25 per cent below the same month last year.

David Dooks, the head of statistics at the BBA, said: “October’s data provide evidence of a rapidly slowing mortgage market and of consumers limiting their personal borrowing.

“Pressure on household finances, the cumulative impact of interest rate rises over the last year, the expanded application of Home Information Packs and the consequential impact of the credit crunch may well all have a part to play in suppressing current demand and supply.”

Last week, Nationwide Building Society forecast that house price inflation would tumble from near-double figures to zero by the end of next year.

Howard Archer, the chief UK and European economist at Global Insight, said: "Slowing housing demand is expected to steadily feed through to dampen house prices over the coming months. Indeed, there is undeniably a very real risk that the housing market could see a sharp correction."

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