Mortgage lending to people buying new homes slumped by more than a half to a record low in August.

Some 21,086 home loans were approved by banks during the month, 64 per cent lower than August last year, figures from the British Bankers Association (BBA) show. This is the lowest figure on record since the series began in 1997.

The BBA figures represent lending from the UK's banks, which accounts for around two thirds of the UK's mortgage lending.

There are fears that the continued scarcity of new buyers, deterred by hefty demands for deposits from lenders and tumbling house prices, could further drag down property values, which have fallen by more than 10 per cent since last summer.

But there was an added difficulty in August as buyers waited for the Government to announce its intentions over stamp duty after intense speculation that it could be scrapped for a time to boost the housing market. The Chancellor finally announced that the 1 per cent stamp duty levy would be abolished for a year on houses worth between £125,000 and £175,000 earlier this month.

Estate agents also reported that buyers adopted a wait-and-see attitude during the month, with each agent selling an average of just five properties in the month, equalling the record low from December last year, according to figures out yesterday from the National Association of Estate Agents.

Total mortgage lending increased by £2.1 billion during the month, less than half the average rise of £4.7 billion in the previous six months.

Howard Archer, of Global Insight, the economic consultancy, said that the current financial turmoil could act as a further drag on the housing market. "It is likely to deepen the pressure on housing market activity through further tightening credit conditions and exerting upward pressure on interest rates. "

Mr Archer forecasts that lending will slump by 15 per cent this year and a further 12 per cent next year.

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