Hopes of a revival in Britain's battered housing market were undermined today by data showing the number of mortgages approved for house purchase fell by 25.3 per cent in the 12 months to March.

Figures from the British Bankers Association (BBA) showed 26,097 mortgages were approved in March, down from 34,920 a year ago.

The number approved was down 7 per cent on the previous month. Until March the figures had shown modest rises for three months.

David Dooks, director of statistics at the BBA, said the figures showed it would be "unrealistic to expect the mortgage market to recover in a steady and consistent way in the current economic environment".

Other recent data has given hope that an end was in sight to the slump in the housing market.

Figures from the Council of Mortgage Lenders (CML) last week revealed that 24,300 mortgages were secured in February, up from 23,400 a month earlier.

A recent Hometrack survey revealed that house prices fell at a reduced rate of 0.3 per cent month-on-month in April while the number of house sales agreed that month rose by nearly 15 per cent.

Howard Archer, chief UK and European economist of IHS Global Insight, said that despite the March relapse revealed by today's BBA figures, the overall evidence was that housing market activity had "very likely passed its worst point, helped by the substantial fall in house prices from their 2007 peak levels and markedly reduced mortgage rates."

The BBA figures, he said, suggested that "the most likely scenario is the pick-up ...will be both very gradual and prone to relapses given still very poor economic fundamentals and relatively tight credit conditions."

Factors including soaring unemployment, muted wage growth and a suspicion that house prices still have some way to fall, would continue to weigh down the housing market for some time to come, he said.

Property groups fear that the chances of a pick-up in market activity could be damaged by plans by Lord Turner of Ecchinswell, chairman of the Financial Services Authority, to outlaw super-sized mortgages.

Lord Turner suggested in his review into the banking crisis in March that the size of mortgages offered by the banks could be capped. A paper to be published in September will further explore the idea which is aimed at drawing a line under the reckless lending to homebuyers, typified by Northern Rock's offer, at the height of the boom, of 125 per cent mortgages.

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