Fresh UK mortgage approvals for house purchase dropped to yet another record monthly low in August, banking industry figures revealed yesterday, signalling further tumbles in house prices and raising the chance of a near-term cut in benchmark interest rates.

Seasonally-adjusted figures from the British Bankers' Association (BBA) showed that only 21,086 fresh mortgages were approved by the big UK banks for house purchase in August.

This is 64% lower than in August last year and down from 22,239 in July.

It is the lowest since comparable records began with the formation in September 1997 of the "major British banking groups" constituency, in the wake of the conversion of several big building societies.

Actual mortgage lending by the big UK banks rose by a net £2.1bn in August - less than half of both a £4.7bn average rise over the previous six months and a £4.8bn increase in July.

Actual lending is a less forward-looking indicator than approvals, but this anemic rise underlines the weakness of the mortgage market.

David Dooks, BBA statistics director, said: "The low number of mortgage approvals in previous months predicted lower gross lending in August and, together with remortgaging, a much weaker net lending figure than of late resulted.

"Falling property prices, economic pressures on households, tighter lending criteria and anticipation of the government's announcement on stamp duty (relief) all suppressed or delayed demand in August and will continue having an impact in the months ahead."

Unsecured consumer credit, comprising personal loans, overdrafts and credit cards, rose by a net £400m in August.

This was greater than the average £300m increase over the previous six months and followed a £100m rise in July.

Personal deposits rose by a net £200m, a weak number in the context of an average increase of £2.2bn over the previous six months but a better showing than the £100m drop in July.

Dooks said: "Monthly fluctuations in consumer credit and deposits reflect the behaviour of families repaying as much as they spend on credit cards and using their current accounts for expenditure."

Interbank lending markets remain extremely tight - spelling higher mortgage interest rates for households and continuing scarcity of home loans as banks attempt to rebuild their balance sheets amid the global credit crisis.

The BBA's London Interbank Offered Rate (Libor) for three-month sterling yesterday rose from 6.01% to 6.065%.

This is more than one percentage point above the UK base rate of 5%.

And three-month sterling Libor remains elevated even though expectations are growing that the Bank of England's Monetary Policy Committee will deliver a cut in UK base rates by the year-end, as the signals on economic activity become ever-more bleak.

The MPC has held base rates since April, when it delivered the third quarter-point cut of this cycle.

Sir John Gieve, deputy governor of the Bank of England and a member of the nine-strong MPC, appeared in a speech on Monday to signal he could be voting for a cut in rates in coming months.

Seema Shah, property economist at consultancy Capital Economics, forecast yesterday that fresh mortgage approvals for house purchase would be at "similarly subdued levels for the next couple of months, with the obvious implication for house prices".

Shah pointed out the chances of people "standing away from such a major purchase" as buying a house were increased as people watched "all this turmoil in financial markets" and considered the impact on the economy.

She also highlighted the likelihood, given conditions in interbank lending markets, that mortgage interest rates would remain high and that lending criteria imposed by banks would continue to be "very tight".

Capital is forecasting a 35% fall in UK house prices from the October 2007 peak recorded in building society Nationwide's monthly survey. The economics consultancy expects the trough to occur around the end of 2010 or start of 2011, although Shah yesterday highlighted a growing risk that prices could have fallen by the projected 35% before then.

Shah said: "Given everything is moving at such speed, (the) chances are maybe it (the fall) might come through quicker."

Howard Archer, chief UK economist at consultancy Global Insight, described yesterday's BBA mortgage data as "really dismal".

He added: "The BBA data graphically highlight that housing market activity continues to be throttled by stretched affordability and tight lending conditions.

"Widespread expectations that house prices will continue to fall markedly for some considerable time to come is also significantly limiting housing market activity, as is heightened concern over the economic outlook and job prospects. Furthermore, the current financial sector turmoil is likely to deepen the pressure on housing market activity through further tightening of credit conditions and exerting upward pressure on interest rates.

"Given these very poor fundamentals for the housing market, the recently announced government measures to support the housing market are very unlikely to have any significant impact in stabilising activity or prices."