House prices need to fall even further in order for mortgage applications to achieve a higher approval rate, according to the Bank of England.

Despite an increase in lending, mortgage application approvals dropped in October 2010 – their lowest level since February this year. Economists have subsequently suggested that house price decreases ‘have much further to go’.

According to the Bank’s statistics, only 47,185 loans were approved for people buying a property last month which is well below the 70,000 to 80,000 approvals a month considered to be consistent with a stable market.

The figures come as property intelligence group Hometrack said house prices fell for the fifth consecutive month in November 2010 as the number of people looking to buy a property dropped at its fastest pace for nearly two years.

A spokeswoman from Capital Economics, said: “October’s UK household borrowing figures provide yet further evidence of the troubles in the housing market. The number of mortgage approvals for house purchase was pretty much unchanged at the very low level of 47,000. With housing market activity this weak, we suspect that the recent house price falls have much further to go.”

Howard Archer, chief UK and European economist at IHS Global Insight, said: “The Bank of England mortgage approvals data shows that housing market activity remains marooned in the doldrums, which seems highly likely to maintain downward pressure on prices. The data reinforces our belief that house prices will trend down to lose around 10% from their peak 2010 levels by the end of 2011.”

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