Lenders have stepped up mortgage approvals to their highest in 18 months, but signs of wider stagnation in the credit markets led economists to predict that the monetary authorities will continue their massive programme of purchasing gilts.

A fall in several measures of the money supply – closely watched by the Bank of England’s monetary policy committee – along with a drop in lending to private companies that form the backbone of the UK economy, may prompt the MPC to increase its quantitative easing programme beyond the current £175bn, economists said.