Mortgage downturn deepens the gloom

The number of new mortgages approved has fallen again, to just 73,000 in December, according to the Bank of England. That figure is around a third below the level recorded last summer and provides further evidence of the housing slowdown.

Meanwhile, Nationwide building society, property website Hometrack and the Government's Land Registry have all reported that property prices are falling.

This is likely to increase the chances of the Bank's Monetary Policy Committee bringing down interest rates when it meets this week.

A cut is seen by many as a surefire bet in order to help boost consumer confidence and reduce the risks of a recession.

"Housing market activity is now being substantially undermined," said Howard Archer, economist at financial analyst Global Insight. "This adds to the already intense pressure on the Bank to cut rates this week, and to enact further reductions thereafter."

Any fall in the cost of borrowing will bring relief to those homeowners who are beginning to struggle with mortgage repayments.

Last week, the Royal Institution of Chartered Surveyors (Rics) issued a stark warning that the number of people losing their homes through repossession is set to rise. Rics said that up to 45,000 properties would be repossessed in 2008. This would represent more than double the figure in 2006, and is in line with a similarly dire prediction from the Council of Mortgage Lenders issued at the back end of last year.

In addition, Rics said that the cost of getting on to the housing ladder for first-time buyers has risen by around 350 per cent since 1996. This underlines, yet again, the extent to which house prices have raced away from people's incomes.