A fresh warning has been sounded over a potential house prices double-dip, as Bank of England figures provided more evidence that the house price rally has run out of steam.

Lending figures for July showed mortgage approvals for homebuyers still remain stuck at just over 50% of the long-term average.

And economists suggest that with momentum lost in the property market, prices should slip again.

However, they say the heavy falls seen in 2008 are unlikely to be repeated and London and the South East should fare much better than the rest of the country.

After hitting record lows in late 2008 and then rising throughout 2009, the number of mortgages being approved for those buying a home has steadied at less than 50,000 per month this year.

House prices rallied as property market activity and homebuyer mortgage approvals rose, but with the market now running out of steam, Andrew Goodwin, senior economic advisor to the influential Ernst & Young ITEM Club, has said prices should slip again.

He said: 'This morning's figures provide further confirmation that the housing market is heading for a double dip, with net mortgage lending pretty much flat and the number of mortgage approvals remaining very low.

'The figures for mortgage approvals, a proxy for activity, tend to be well correlated with prices and the latest figures clearly point to falling prices over the second half of this year and into 2011, particularly now that supply shortages have eased.'

Goodwin suggested annual price falls of between 3% and 5% will be seen over the next 12 months, before house price stabilise.

Today's Bank of England lending figures showed 48,722 mortgages approved for house purchase in July, in line with the 48,546 six-month average, but Goodwin pointed out this is well below the ten-year monthly average of about 93,000. Net lending rose by just £100m – down considerably on the £500m seen the month before and £800m six-month average.

Howard Archer, chief UK and European economist at analysts IHS Global Insight, said evidence from the property market has been 'consistently downbeat recently'.

He said: 'Consequently, we continue to suspect that house prices will fall back over the latter months of 2010 and then very likely soften further in 2011.'

Archer forecasts house prices to fall 3% during the second half of this year, followed by a drop of around 5% in 2011. This would be far gentler than the double-digit falls registered by the major house price reports in 2008 and early 2009

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, says the problem for those without a spot-on credit history and big deposit remains difficulty in securing mortgages.

He said: 'A lack of mortgage finance remains a key problem for many borrowers looking to take their first step on the property ladder, with the high deposits required still proving to be an obstacle for many. Uncertainty over the outlook for the market may also be discouraging would-be buyers.'

The warning that austerity measures will now replace economic stimulus is leading homebuyers to be more cautious, according to mortgage brokers. This combined with the knowledge that interest rates must head up at some point is leading to more borrowers taking out fixed rate mortgages rather than cut-price trackers.

Brian Murphy, head of lending at independent mortgage broker Mortgage Advice Bureau, said the mortgage market was stabilising and homebuyer levels could remain low for the rest of the year.

He said: 'The October Spending Review — D-Day for consumer confidence — is approaching fast and many prospective borrowers are understandably being cautious. Only once the full extent of the cuts is known will borrowing levels move more decisively in any one direction.

'The appetite for fixed rate loans has risen consistently throughout the year, which suggests people are being more cautious in the run-up to the Spending Review.'