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According to the BoE, mortgage approvals have dived by almost 70% in the past year. Just 36,000 new loans arranged for people moving home during June - that is 69% fewer than in the same month last year and 12% lower than May’s figure, according to the Bank of England.

Mortgage lending also dropped steeply during the month, with net advances hitting a near eight-year low of £3.1bn.

The number of home loans approved has now fallen for 14 consecutive months and is at its lowest since the BoE first issued figures in 1993.

Lenders have tightened their criteria because of the credit crunch, reducing the availability of mortgages, especially to would-be buyers with small deposits.

The BoE figures come as a report for the Treasury warned there is no quick fix for the problems in the mortgage market.

The Crosby Review, which is being carried out by the former head of the Halifax Bank of Scotland Group (HBOS), Sir James Crosby, says funding of home loans should be left to the market.

Sir James says Britain should avoid setting up US-style government-backed agencies to tackle the funding crisis.

But his independent report stops short of making recommendations on how to tackle the problems caused by the credit crunch.

It moots the idea of possible further support from the Treasury to help kick-start mortgage lending

The Bank of England data shows a fall in all types of mortgage approval, with just 165,000 new loans agreed during June, down from 214,000 just three months earlier.

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Retailers are facing tough conditions on the High Street, analysts say
Rising food and fuel costs pushed UK inflation up to an 11-year high of 3.8% in June from 3.3% in May, figures show.

The rise means inflation is now well above the government’s 2% target, and may reduce the chance of a UK rate cut.

The Bank of England, which has already said inflation may top 4% this year, has to balance the need to control inflation with worries over growth.

The RPI inflation measure - often used as a benchmark in pay negotiations - rose to 4.6% in June from 4.3% in May.

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The Bank of England kept British interest rates at 5.0 percent today but analysts say a slowing economy will force it to cut borrowing costs next month, even though inflation is heading higher.