Reports indicate the downturn in the housing market is getting worse after the number of mortgages approved for house purchases hit a new record low in May.

Loan approvals for people buying a new property fell by 28% during the month to just 42,000 - 64% fewer than in May last year and the lowest level since the Bank of England figures began in 1993.

Mortgage advances also dropped on the back of recent weak approvals, to hit a seven-year low of just £4.07 billion, a third lower than in April.

Even approvals for people remortgaging, buoyed in recent months by homeowners coming to the end of short-term fixed rate deals, were depressed.

About 90,000 home loans were approved for people remortgaging, down from 100,000 in April.

Economists labelled the below expectations figures "absolutely dire" and "disturbing", and warned they indicated the current housing market downturn could be worse than previously thought.

The credit crunch is currently choking the property market as people struggle to secure the finance they need, while the cost of borrowing money has become increasingly expensive.

The problems have hit demand, leading to a 37% slide in the number of homes changing hands in May, and exacerbating affordability issues.

The figures come as property information group Hometrack reported that house prices fell for the ninth month in a row during June, losing a further 1% of their value.

Capital Economics described the Bank of England data as "absolutely dire", warning that the drop in mortgage approvals pointed to house price falls of 15% to 20% this year, with price declines continuing into 2010.

Seema Shah, property economist at Capital Economics, said: "Another plunge in housing market activity has brought mortgage approvals down to unprecedented levels.

"With little evidence of an easing in the mortgage credit squeeze, further falls cannot be ruled out."

She added that with housing market activity already at such depressed levels, further sharp drops in house prices were unavoidable.

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