Mortgage approvals rose for the first time in more than a year, reaching 33,000 on the month, The Times of London reported.

Despite the gain, "at this level, the figures are consistent with annual house price inflation between minus 20 percent and minus 25 percent, compared with the current rate of minus 13 percent or so," Vicky Redwood of Capital Economics told The Times.

"This is another very weak set of Bank of England mortgage approvals and lending data that suggests that the downturn in housing market activity and prices still has a long way to run," Howard Archer of Global Insight said.

"On the positive side for the housing market, the Bank of England seems likely to cut interest rates more aggressively as a consequence of the now-deep economic downturn," he said.

"Indeed, it looks very possible that interest rates could fall from 4.5 percent to 3.5 percent by the end of 2008 and all the way down to 2 percent in 2009," Archer predicted.