British mortgage approvals fell in October to match their lowest level since the series began a decade ago, data showed on Monday, putting further pressure on policymakers to get banks lending again.
Mortgage lending was also much weaker than expected, and less than a sixteenth of its level a year ago.
The government has injected 37 billion pounds of public funds into major banks and offered unprecedented guarantees for short-term bank debt. But these actions have so far done little to stimulate fresh lending as banks shore up their balance sheets in the face of an impending recession.
Mortgage approvals — a leading indicator of housing demand — fell from 33,000 in September to 32,000 in October, matching August's reading which was the lowest since the series began in January 1999.
Mortgage lending totalled just 459 million pounds, down from September's 1.492 billion and more than 8 billion pounds a year ago.
A global shortage of capital has forced many banks to clamp down on lending over the past year, squeezing the lifeblood out of the property market. House prices have already fallen around 15 percent from their peak last year and show no sign of stopping.
Bank of England Governor Mervyn King told legislators last week that getting banks lending again was the single most pressing challenge for the economy, which otherwise risked a sharp recession.
Finance minister Alistair Darling has warned the government will clamp down harder on banks if they refuse to honour pledges on maintaining lending in the downturn.
The Bank of England has cut interest rates by two percentage points since October to 3 percent, and investors expect another cut of up to a percentage point this week.
Gilts rose after the data — which coincided with a survey showing Britain's manufacturing sector contracted at a record pace last month — as markets increased bets on a hefty UK rate cut on Thursday.
"Mortgage approvals are bottoming out at a very low level," said Brian Hilliard, chief UK economist at Societe Generale.
"We are going to see very poor numbers for the next month or two but then I think we should see some modest improvement — partly because of lower interest rates but also because of the very strong directives from the government to get out there and lend."
