The quantity of mortgage applications approved for those seeking to buy a home in the UK dropped to just 33,000 in July, adding to fears of an imminent recession.

Numbers from the Bank of England (BoE) reveal that the volume of mortgages approved was reduced by 71 per cent year-on-year to a new record low, as lenders decided against funding to buyers. The credit crunch has forced the lenders to take stock of the money that they are lending and the new BoE figures are seen by many analysts as yet another kick in the teeth for the economy.

Adrian Coles of the Building Societies Association told the BBC: "Activity in the housing market is still on the wane and the approvals figures suggest this is probably going to remain 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, stronger than predicted still only 33 per cent of the increase seen the same time 12 months ago.

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.

Only last week, the latest results 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 cut 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 is likely to maintain interest rates on hold at five per cent this time around.

Howard Archer, an economist at Global Insight, told Reuters: "Although we now predict the BoE to cut interest rates within 4 months, we believe it won't change before November when there is likely to be more evidence that the deepening economic slowdown and increasing 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.

Mark Dawson writes for Loan-Arrangers .co.uk where visitors can compare loans online. With online application for everything from home improvement loans to debt consolidation loans.