The number of fresh mortgages approved for house purchase in the UK dropped to yet another record monthly low in August, according to official data yesterday.

The number of fresh mortgages approved for house purchase in the UK dropped to yet another record monthly low in August, according to official data yesterday which compounded sterling's troubles and signalled further significant falls in residential property prices.

The data were published as a continuing surge in interbank lending rates pointed to further increases in the cost of mortgages.

Mortgage interest rates have gone back on to an upward path since the collapse of US investment bank Lehman Brothers a fortnight ago triggered a fresh wave of trouble in global credit markets.

The Bank of England said yesterday that 32,000 new mortgages were approved for house purchase in the UK last month - down from 33,000 in July and the weakest figure since this data series began in April 1993. The August number was, however, not quite as bad as the 30,000 figure projected by the City.

UK mortgage lending for all purposes rose by only a net £143m during August, only 3% of the £4.7bn average monthly increase in the previous six months.

The weak mortgage lending data compounded sterling's troubles yesterday.

Sterling, already reeling from news of the nationalisation of UK mortgage bank Bradford & Bingley, plummeted more than four cents from its pre-weekend close against the dollar to an intra-day low of $1.7962.

The pound had by last night clawed back some of its earlier losses and was trading around $1.8160 - still down more than two cents on its close in London on Friday.

Sterling also tumbled yesterday against the euro. The single currency rose through 80p, climbing as high as 80.16p during the session.

The euro was last night trading around 79.74p - up about 0.4p on its pre- weekend close.

The British Bankers' Association's London Interbank Offered Rate for overnight sterling jumped from 5% on Friday to 5.2625% yesterday - more than one-quarter of a point above the Bank of England's base rate of 5%. Three-month sterling Libor rose from 6.255% on Friday to 6.26125% yesterday.

Seema Shah, property econ- omist at London-based consultancy Capital Economics, said yesterday: "There is not much to be positive about in the housing market."

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 in house prices to occur around the end of 2010 or start of 2011, although Shah has highlighted a growing risk that prices could have fallen by the projected 35% before then.

Noting the fall in fresh mortgage approvals for house purchase between July and August was less steep than recent monthly drops, Shah said yesterday: "It might be an indication that mortgage approvals have started to reach their floor."

However, Shah cautioned that mortgage approvals had "surprised on the downside" frequently in recent times.

And she saw no chance of a significant rebound in mortgage approvals in coming months even if they had reached their floor.

Shah said: "The mortgage squeeze doesn't show any signs of abating. We have started to see mortgage rates rise in recent days. The economy is slowing down sharply. It doesn't seem likely there can be a sharp rebound in mortgage approvals."

The Bank of England lending numbers include banks and building societies.

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

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

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