Mortgage approvals have fallen 71 per cent in a year, according to new statistics from the Bank of England.
The number of new homeowner loans declined to a record low of 33,000 in July, compared with 114,000 in the same period last year.
Remortgages also suffered a drop, falling from 80,000 in June to 69,000 in the following month.
However, net mortgage lending, which takes out repayments and redemptions, increased to around £3.2 billion in July, an increase from the previous month.
Commenting on the figures, shadow chief secretary to the Treasury Philip Hammond said: “The government should make an early announcement to avoid further damage to the market.”
A recent study by the Royal Institute of Chartered Surveyors blamed the inability to secure a mortgage as a major factor in failed house sales. The average number of transactions per surveyor fell to 14.4 in July, the lowest figure in the study’s history.