The number of mortgages approved for house purchase slumped to a new record low during November, figures showed today.
Just 27,000 loans were arranged for people buying a new property during the month, only a third of the number arranged in November 2007, according to the Bank of England.
The figure was also 13% lower than in October, ending a four-month period du
ring which mortgage approvals for house purchase had remained broadly stable at around 32,000.
The number of new loans approved was below economists' expectations, and suggested that November's surprise 1.5% reduction in interest rates had failed to have an immediate impact on housing market activity.
There was also a sharp fall in the number of new mortgages in the pipeline for people remortgaging, with these diving from 72,000 in October to just 42,000 in November, while there was also a slight fall in approvals for equity release and buy-to-let loans.
The value of total mortgage advances continued its downward trend, falling for the 10th month in a row to £15.49 billion, the lowest level since December 2001.
But net lending, which strips out redemptions and repayments, recovered slightly to £740 million, compared with just £477 million in October, which was the second lowest figure recorded since the Bank's records began in April 1993.
However, November's level was still less than half of the recent six-month average for net lending of £1.9 billion.
Unsecured lending remained broadly unchanged compared with the previous month, with a total of £15.07 billion advanced through credit cards, overdrafts and loans during November.
Credit card borrowing accounted for £10.63 billion of this total, however, once repayments were taken into account, outstanding plastic debt rose by £396 million, slightly down on October's rise of £405 million.
Overall, outstanding unsecured debt increased by £751 million during November.
Figures released by the Building Societies Association also showed mortgage lending had remained subdued during November.
The group said net lending by the sector was £422 million in November, a slight improvement on October's £413 million, but still well down on £790 million in November 2007.
The amount consumers had saved with building societies rose by £636 million during the month, well up on the previous month's figure of £115 million, but down on £2.35 billion in November 2007, when the level was boosted by the problems at Northern Rock.
The BSA said following November's 1.5% interest rate cut, savers were keen to take out fixed rate deals.
Liberal Democrat Treasury spokesman Vince Cable said: "It is understandable that when house prices are falling and are expected to continue to fall for some time borrowers will hold back rather than risk finding themselves in negative equity.
"Nonetheless it does appear that the inevitable big correction in the housing market is being exaggerated by the complete collapse of mortgage lending by the banks.
"The Government is completely paralysed at this crucial moment.
"Ministers should consider promoting a simple, standardised mortgage with a market guarantee for the first few years of interest payments in order to help first-time buyers who can genuinely afford to take on home ownership.
"The role of Northern Rock, which is a nationalised mortgage lender, must be reconsidered. It is currently totally committed to running off its loan book and avoiding new lending.
"This strategy may have made sense at the beginning of last year, but increasingly makes no sense in the very different environment we now face."
Andrew Montlake, partner at mortgage broker Cobalt Capital, said: "The November mortgage lending figures are just another grim reminder of the death last year of easy money and consumer confidence, and there will be many more reminders in the months ahead before things finally start to improve."
Liberal Democrat treasury spokesman Vince Cable said: "It is understandable that when house prices are falling and are expected to continue to fall for some time that borrowers will hold back rather than risk finding themselves in negative equity.
"Nonetheless it does appear that the inevitable big correction in the housing market is being exaggerated by the complete collapse of mortgage lending by the banks. The Government is completely paralysed at this crucial moment.
"Ministers should consider promoting a simple, standardised mortgage with a market guarantee for the first few years of interest payments in order to help first-time buyers who can genuinely afford to take on home ownership."
He added that the strategy being pursued by nationalised bank Northern Rock of running down its loan book and avoiding new lending should be reconsidered as it made no sense in the current environment.
