There was a significant fall in mortgage approvals last month, with transactions returning to levels last seen – excluding the Covid period – during the global financial crisis, the latest Bank of England data reveals.

According to the data, 35,612 mortgages were approved last month, down from 46,186 in November.

Excluding the Covid-19 pandemic when lockdowns brought the housing market to a standstill, it was the lowest reading since January 2009, when Britain faced a steep recession.

Ashley Webb, economist at Capital Economics, said: “Overall, the cumulative downward effect from higher interest rates appears to be starting to weigh more heavily on the economy.

“And given the large share of fixed-rate mortgages, this effect is only going to grow throughout this year.”

The BoE is widely expected to raise interest rates again tomorrow to 4% from 3.5%.

Tom Bill, head of UK residential research at Knight Frank commented: “Housing market data from December is largely redundant given how early buyers and sellers stopped for Christmas due to the volatility sparked by the mini-Budget. Activity has bounced back in January and the next few weeks will show whether this is short-lived or there is some momentum in the system.

“So far, buyers and sellers seem to have accepted that there is a new normal for mortgage rates and that the main cause is the Bank of England rather than a poorly-received government plan to cut taxes.”