The number of fresh mortgages approved by the big UK banks for house purchase was last month within 100 of June's record low - industry figures showed yesterday - signalling prices in the residential property market are likely to continue to fall.

The number of fresh mortgages approved by the big UK banks for house purchase was last month within 100 of June's record low - industry figures showed yesterday - signalling prices in the residential property market are likely to continue to fall.

Seasonally-adjusted figures from the British Bankers' Association showed that only 22,448 fresh mortgages for house purchase were approved by the major UK banks in July.

This was up only marginally from June's 22,369. The June number 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.

July's approval number was 65% adrift of the figure for the same month of last year. It was also significantly behind even the anaemic 34,104 average for the previous six months.

The average size of mortgage approved for house purchase in July was £138,000 - 11.9% lower than in the same month last year.

Seema Shah, property economist at consultancy Capital Economics, said: "Housing market activity remained very subdued in July, with the number of new mortgages approved remaining close to record lows, albeit marginally higher than the previous month.

"While it is possible, but by no means certain, that mortgage approvals have hit their floor, with the economy now teetering on the edge of recession and lending criteria still tight, mortgage demand is likely to remain at current low levels for some time."

The mortgage and housing markets have been hit hard by the global credit crisis. Amid the crisis, banks have hiked arrangement fees on mortgages, raised interest rates on many home loans, and tightened lending criteria.

Mortgage lending by the big UK banks rose by a net £4.3bn in July on a seasonally-adjusted basis - adrift of the £4.8bn average for the preceding six months but the same increase as in June. This lending figure takes in remortgaging and equity withdrawal, as well as loans for house purchase. It is a less timely indicator of mortgage market activity than approvals because it measures when the money is actually lent, rather than promised.

Shah, although continuing to believe that June may have marked the low point for mortgage approvals, does not envisage any significant rebound.

She said: "As we said last month, June may have marked the low for mortgage approvals. There are signs that the mortgage credit squeeze may be easing. Recent weeks have seen some lenders begin to lower selected mortgage rates. However, these reductions are largely restricted to lower-risk borrowers and lending criteria remain tight."

Shah believes Capital Economics' forecast of a 35% fall in UK house prices from their peak levels remains on track.

She said: "The negative sentiment towards the housing market suggests that even those people who can obtain and afford a mortgage may choose to steer clear of the housing market until house prices appear to have reached a floor.

"In addition, with the economy slowing sharply, we certainly cannot discount a further fall in mortgage approvals.

"Overall, housing market activity is likely to remain subdued for some time to come, suggesting that our forecast for a 35% drop in house prices remains on track."