Approvals drop by 31 per cent

However according to the Council of Mortgage Lenders (CML) this actually shows a less dramatic slowdown in mortgage approvals than preliminary surveys had suggested.

This is partly due to October 2006 being one of the strongest months for lending in the past four years.

CML director general Michael Coogan said: "The market is slowing, as we have always said it would at this point in the year. And the slowdown is being exacerbated by the funding shortfall being experienced through the continued closure of the securitisation market.

"But the situation is not as bleak as some of the more dramatic commentary would suggest. Even so, we would like the government and the Bank of England to consider how best to unblock the funding logjam that some UK lenders are experiencing, so that they can continue to fully meet consumer demand."

Ian Kernohan, economist at RLAM, was however pleased to see the BoE's figures as in his opinion they strengthen the case for a rate cut in December: “Much weaker mortgage approvals data help to bolster the case for a rate cut next week. The MPC wanted the economy to slow; they did not want to see it slide.

"Weaker data will be one factor weighing on the minds of the MPC, but money markets conditions will also play a role. Markets are still under stress, suggesting that financial conditions are tighter than appropriate.”