There are renewed concerns about the state of the UK's housing market after the number of mortgages approved for home-buyers fell to a record low during December.

The major banks only approved 42,088 new loans in the month, the worst figure since the British Bankers' Association first started to collect the data 11 years ago.

A total of £15.1bn was advanced to customers in December, the lowest level since September 2005 and 22% down year-on-year.

Mortgage lending values decreased steadily during 2007 following the impact of the credit crunch and a reduction in disposable income.

But net lending, which strips out redemptions and repayments, lifted last month to £4.7bn compared with £4.6bn in November, although this is still below the average for the previous six months.

There was also a slight increase in the number of remortgage approvals, with around 62,771 new loans in the pipeline, compared with 59,628 in November.

The BBA's director of statistics David Dooks said: "Mortgage lending weakened notably in the second half of 2007 as the credit crunch impacted on banks' ability to lend.

"At the same time, demand for mortgages also softened in the face of increased borrowing costs and lower disposable income.

"The combination of these factors is resulting in the marked market slowdown and weakness in house prices we are now seeing."

Howard Archer, chief UK and European economist at Global Insight, added: "The December BBA mortgage data provide yet further evidence that housing market activity is now being substantially undermined by both stretched affordability and tightening lending practices.

"This adds to the already intense pressure on the Bank of England to cut interest rates in February, and to enact significant further reductions thereafter."

Outstanding debt on credit cards increased in December, but only by £200m as repayments continued to outstrip spending as consumers tightened their belts.

Mr Dooks said: "Reports of high street sales over the Christmas period were mixed, but our figures show consumer borrowing to have been muted in December."

Saving levels reached £1.9bn during the last month of the year, £200m more than in November, although the figure is still subdued compared with the rest of 2007.

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