Mortgage approvals for house purchases fell sharply between August and September from 74,400 to just 66,800, said the Bank of England.

The approvals figures, which give an indicator of future borrowing, were also below the past six-month average of 67,200.

The change reflects the housing market slowdown precipitated by the cost of living crisis followed by the disastrous mini-Budget.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Bank of England figures capture the initial impact as the mini-budget collided with the mortgage market, but we’re likely to see the shockwaves ripple through it in the months to come too.

“Despite the fact the mini-budget hit within a week of the end of the month, it was long enough to see the biggest jump in mortgage rates in 2022 so far, and a 10% drop in the number of mortgages being approved for the coming months.

“We already know from various house price indices that demand fell immediately, but this is the first clear overall picture of the mortgage market in September – and it doesn’t look pretty. A 10% drop in the number of mortgages approved for future purchases is a significant overnight change. We can expect this to feed into house sales and price data in the coming months.”

Interest rate rise

The ‘effective’ interest rate – the actual interest rate paid – on newly drawn mortgages increased by 29 basis points to 2.84% in September, up from 2.55% a month earlier. It’s the largest monthly increase since rates started rising last December.