Sharp falls in approvals of new loans for buyers and in mortgage borrowing during August, added to mounting evidence yesterday that the housing market is rapidly losing steam as higher interest rates start to bite.

But hopes that the Bank of England might buoy property conditions with a cut in interest rates, were dealt a blow by separate figures showing record price pressures in manufacturing.

As the Bank’s Monetary Policy Committee (MPC) prepares for this week’s rate-setting meeting, news that industrial companies are pushing through big price increases for goods leaving their factories will fuel its anxieties over inflationary risks.

Yesterday’s snapshot of manufacturing in the latest CIPS purchasing managers’ survey, showed that output fell back from a 13-year high hit in August and orders dipped, although overall conditions remained robust.

The MPC’s attention is likely, however, to focus on CIPS’s evidence that the cost of goods leaving Britain’s factories rose last month to its highest since the survey began in 1999. The survey’s September index of manufacturers’ output prices jumped to 57.8 from 56.0 in August. Any figure over 50 indicates rising prices.

Hopes that interest rates may nevertheless fall by Christmas or early next year were boosted though by indications of a wilting housing market.

The number of new mortgages approved in August by lenders dropped to 109,000 from 115,000 in July, the lowest level since April, according to worse than expected data from the Bank of England. The Bank’s figures also showed net mortgage lending fell to £8.5 billion in August, from £8.9 billion in July.

The Bank reported that mortgage equity withdrawal – where homeowners cash in on rising property values to borrow against their homes – tumbled in the second quarter to £10 billion, from £13.1 billion in the previous three months. This took equity withdrawal to its lowest as a proportion of after-tax incomes since the start of 2005, at 4.5 per cent, down from 6.5 per cent in the first quarter.

The figures will stoke fears that the slowdown in the housing market will feed through to the high street.

But retailers found reassurance yesterday that borrowing via credit cards and unsecured personal loans was stronger than expected in August.