New mortgage approvals by the major banks have fallen to their lowest level since records began in September 1997, according to the British Bankers' Association (BBA).

Just 21,118 mortgages were approved in June, a 23% fall since the previous month and a drop of 66.9% compared with the previous year.

The figures for mortgages approved, but not yet actually lent, are widely considered to be an accurate indicator of near-term trends in the market – suggesting that the fall in house prices is set to continue apace. British house prices have fallen by almost 10% from their peak last August, and recent government figures show that the number of British homes changing hands almost halved in June.

Obtaining mortgage approval has become more difficult as lenders place tighter restrictions on credit. A year ago loans of 100% or more of a property's value were commonplace. Now, nearly all loans are for a maximum of 90%, and several lenders now demand higher deposits of 15% or even 20%.

BBA director of statistics David Dooks said: ‘Another record low number of mortgages approved by the banks for house purchase means that the whole market is likely to be at its least active since the early 1990s.’