Approvals for new mortgage loans in the UK dropped to a record low in the month of May, revealed official data today.

Report said it was a clear indication that house prices will fall sharply in the coming months, as the Bank of England confirmed that only 42,000 homes were approved last month. It was a 28 per cent fall compared to the previous month and 64 per cent down on a year ago.

The drop was lower than what had been predicted by analysts and the lowest seen since the Bank started reporting the figures in 1993.

The credit crunch is generally blamed for the slump in mortgage lending and most mortgage lenders in the country have responded to the crisis by either withdrawing products or raising rates.

The number of home loans approved, according to the figures, has fallen for 13 months running.

Chief economist at analyst Investec, Philip Shaw said the figures were terrible, adding that it was suggestive of what was happening on the housing market.

“The real danger is there is a knock-on effect to consumer activity,” he added.

Following the current situation in which the economy is facing a sharp slowdown and inflation reached a record high since the Bank of England was given control of monetary policy in 1997, the Monetary Policy Committee is expected to hold rates steady.

Meanwhile, figures from the British Bankers’ Association also showed a huge fall in mortgage approvals, by 20 per cent last month compared to April.