Approvals hit five-year low

Mortgage approvals fell to a five-year low in December of 40,201, a drop of 7% from the month before and 38% from a year earlier, the British Bankers' Association said.

New mortgage approvals are considered a good indicator of where house prices are headed. Although the annual drop was steep, economists said it was less steep than in November and so may be pointing to a bottoming out in the market.

The BBA figures are not seasonally-adjusted, and the City is awaiting adjusted figures next week from the Bank of England to get a fuller picture of the state of the mortgage market.

Economists warned that the Bank's November figures could have been skewed by new rules introduced by the FSA in October. December's figures could show a small recovery.