The number of mortgages approved for house purchase slumped to a new record low of 27,000 in November.

The figure was also 13 per cent lower than in October, ending a four-month period during which mortgage approvals for house purchase had remained broadly stable at around 32,000.

Andrew Montlake, partner at mortgage broker Cobalt Capital, said: "The November mortgage lending figures are just another grim reminder of the death last year of easy money and consumer confidence, and there will be many more reminders in the months ahead before things finally start to improve."

Liberal Democrat treasury spokesman Vince Cable said: "It is understandable that when house prices are falling and are expected to continue to fall for some time that borrowers will hold back rather than risk finding themselves in negative equity.

"Nonetheless it does appear that the inevitable big correction in the housing market is being exaggerated by the complete collapse of mortgage lending by the banks. The Government is completely paralysed at this crucial moment.

"Ministers should consider promoting a simple, standardised mortgage with a market guarantee for the first few years of interest payments in order to help first-time buyers who can genuinely afford to take on home ownership."

He added that the strategy being pursued by nationalised bank Northern Rock of running down its loan book and avoiding new lending should be reconsidered as it made no sense in the current environment.

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