The number of mortgages approved for people buying a home fell to a record low in December, figures showed today.

Just 42,088 new loans were approved for house purchase by the major banks.

The figure is 38 per cent below the level for December 2006, and the lowest figure since the British Bankers’ Association first began to collect data in 1997.

Total mortgage advances also fell to levels last seen in September 2005.

A total of £15.1 billion was advanced to consumers, down from £16.5 billion in November and 22 per cent below the figure for December 2006.

The figures offer more gloom in a week which saw shares drop and interest rates cut in the US.

Analysts say the value of mortgage lending fell steadily during 2007, as the global credit crunch, slowing housing market and reduced disposable income impacted on the market.

The report came as the FTSE 100’s rollercoaster ride took a new turn as London’s leading shares soared in early trading.

Investors were encouraged by a sharp recovery in US markets last night as Wall Street’s Dow Jones Industrial Average turned early losses into a 300-point gain.

The Footsie opened more than two per cent, 125.7 points higher, at 5,735 – and then moved up again to 5,777.2.