Mortgages approvals for home buying by the major banks fell again in December, industry figures show…

British Bankers' Association (BBA) members approved 42,088 new loans last month, the lowest figure since data started being collected in 1997. The amount of money advanced for home purchases dropped to £15.1bn, a level last seen in September 2005.

Analysts have renewed calls for the Bank of England to cut interest rates. The overall value of mortgages approved during December was £16.5bn, 10% less than the total approved in December 2006.

The BBA figures are in line with recent data from the Council of Mortgage Lenders (CML), which represents a wider group of financial institutions. The CML said gross lending fell 25% in December to reach £22.6bn, the lowest monthly figure since May 2005.

Demand ‘softening’

David Dooks, BBA statistics Director commented: "Mortgage lending weakened notably in the second half of 2007 as the credit crunch impacted on banks' ability to lend.

“At the same time, demand for mortgages also softened in the face of increased borrowing costs and lower disposable income. The combination of these factors is resulting in the marked market slowdown and weakness in house prices we are now seeing," he added.

Howard Archer, Chief UK and European Economist at Global Insight added: "The December BBA mortgage data provide yet further evidence that housing market activity is now being substantially undermined by both stretched affordability and tightening lending practices”.

"This adds to the already intense pressure on the Bank of England to cut interest rates in February, and to enact significant further reductions thereafter”.