The number of mortgages approved for home buyers has slumped by 46% during the past year, according to new figures.

Mortgage approvals dropped to 35,417 in March, the lowest level since the British Bankers' Association began collecting statistics in 1997.

Across the board just 129,300 mortgages for all purposes were approved during the month, the lowest level since September 2000, as the market continued to be constrained by lenders' higher rates and tighter lending criteria.

Mortgage advances were also subdued, with a total of £16.6 billion advanced during March, £1 billion less than in February and 14.7% less than in the same month of 2007.

The BBA said it expected gross lending to continue to weaken due to the continuing decline in mortgage approvals.

Net lending, which strips out redemptions and repayments, totalled £5.1 billion, down from £5.5 billion in February.

The Bank of England offered help to banks earlier this week when it unveiled a £50 billion scheme to help tackle the problems caused by the credit crunch, under which lenders can swap their riskier mortgage-backed assets for safer Government bonds.

Lenders welcomed the announcement as an important step to tackling the current funding difficulties they faced, but warned that it was unlikely to lead to a reduction in mortgage rates for new borrowers in the foreseeable future.

The credit crunch has led to steep increases in mortgage rates, with the cost of two-year fixed-rate deals for people with a 5% deposit recently hitting a seven-and-a-half-year high, despite falling interest rates.

Lenders are raising their rates to reflect their own higher borrowing costs, and are demanding ever higher deposits from borrowers, making it increasingly difficult for people to get on to and up the housing ladder.

David Dooks, BBA statistics director, said: "The consequences of low banking sector liquidity show up clearly in March data.

"Reduced product ranges and tighter criteria resulted in slower mortgage lending and significantly fewer loan approvals.

"Pressure on personal finances are also constraining demand, not only for mortgages, but also for personal loans and borrowing on cards."

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