There comes a point when you just have to stand back in amazement. Last week, I reported that the banks had provided fewer than 28,000 new mortgages in May, 56% down on a year earlier. What was not clear then was that this was in the context of the banks themselves gaining market share. Full figures for new mortgages in May, courtesy of the Bank of England, showed an even bigger drop, 64%, to just 42,000 from all lenders. Getting a mortgage these days is becoming almost as rare as winning the lottery.

These figures are worth setting in context. They are a third of the monthly number of mortgage approvals we saw in November 2006, when 129,000 were granted. So how low can they go? Will it be 30,000, 20,000 or none at all? When will the point come at which we will be able to look back and say: I was there when history was being made? Well, maybe not quite yet. The consensus in the industry is that there is no sign of a thawing of the mortgage freeze, despite a couple of rare examples of rates actually coming down.

At some stage, though, mortgage lenders will have to start lending to the customers they are currently freezing out, that being their business. Remember building societies? Net lending by them in May was just £125m compared to £1.26 billion in May last year, a 90% drop. The rise in fixed rates means the incentive for borrowers to remortgage has been significantly reduced – many who come to the end of their fixes are simply shifting to their existing lender’s standard variable rate. That and the fact that the margins on new mortgage business are widening - the banks and building societies can make more money out of it - should gradually make a difference, although the prime requirement is a freeing up of those wholesale funding markets that fell victim to the credit crunch.

In the meantime, this level of mortgage approvals has to mean further house price falls in the coming months. Housing demand, constrained by the absence of funding, is falling faster than supply. The Nationwide building society said prices dropped by 0.9% last month, after a 2.5% fall in May, and are down 6.3% on a year ago. Allowing for inflation, currently more than 4% on the retail prices index, that is a drop of more than 10% in “real” terms. Housing is getting cheaper, a fact that will eventually bring back the buyers. As long, of course, as they can get a mortgage.

home.economics@sunday-times.co.uk

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