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The quantity of new mortgages approved for those looking to buy a new property in the UK dropped to just 33,000 in July, adding to worries of an imminent recession.

Figures from the Bank of England (BoE) reveal that the number of mortgages approved dropped by 71 per cent year-on-year to the lowest recorded, as lenders choose not to fund to buyers. The credit crunch has forced the finance companies to take stock of the money that they are lending and the new BoE figures are seen by many analysts as another blow for the economy.

Adrian Coles of the Building Societies Association told the BBC: "Activity in the housing market is still waning and the approvals figures suggest this is probably going to stay with us for some time. Recent reductions in property values have been widely publicised, reducing potential buyers' confidence and keeping them out of the market."

The collapse by specialist lenders other than banks and building societies, such as those dealing with sub-prime mortgages, is also illustrated by the BoE figures. In July 2007, such lenders gave out 32,000 mortgages for house purchase; in July 2008 they lent just 2,000. Meanwhile, mortgage lenders across the UK approved just 7,000 home loans, compared to 24,000 by the major banks.

The Bank also said that mortgage lending rose by 3.231 billion pounds in July, more than predicted but just 33 per cent of the increase seen last year.

However, in spite of the decline, building societies have seen that their inflow of cash from savers has continued to climb, with savings accounts in building societies having a total of 1.435 billion pounds in July, compared to 723 million pounds this time last year.

Released last week, the latest survey from Nationwide found that UK house prices saw an annual double-digit fall for the first time since 1990 - with prices 10.5 per cent lower in August than a year ago. The new BoE figures could increase the pressure on the Bank to reduce the base rate of interest in order to help the housing market and the wider economy. However, when the monetary policy committee meets this Thursday (September 4th), it will probably keep interest rates on hold at five per cent in the interim.

Howard Archer, an economist at Global Insight, told Reuters: "Although we are positive the BoE to cut interest rates in the next quarter, we believe it will not change before November when there is likely to be growing evidence that the deepening economic slowdown and growing unemployment are diluting underlying inflationary pressures."

In August, the BoE chose not to change the base rate at five per cent for the fifth consecutive month, after a 0.25 per cent cut in April. As a result of this consumers' abilities to handle other spending costs - in areas such as personal loans, credit cards and transport costs - did not come under further pressure.