There were just 36,000 mortgages approved in June 2008, less than a third of the level of a year before, according to figures from the Bank of England.

The low level of approvals suggests further weakening of prices in the housing market, Reuters in London reported. “Even if they don’t fall any further, these numbers are consistent with house prices continuing to fall quite rapidly,” said George Buckley, chief UK economist at Deutsche Bank.

Mortgage lending in June was also below estimates, rising by just £3.1 billion, the smallest increase since October 2000.

The Bank’s figures also reveal that consumer credit rose by £872 million – less than expectations - taking overall net lending up by less than £4 billion, the smallest rise since February 1999.

With residential property prices already 8% off their peak of 2007, pundits suggest the market could drop by as much as 30% by the end of next year. Any opportunity the Bank of England might have to reduce interest rates and stimulate the market is limited by its need to restrict inflation.