Yesterday, we learned that mortgage approvals for house purchases fell from 49,500 in July to 45,400 in August. That’s a six-month low as rising interest rates scare off buyers. 

It’s even worse than it looks, because that was supposed to be the busy summer period. The number of house purchases fell 16 percent on August last year to 87,010.

Things are unlikely to get better over the rest of this year, and may get a lot worse.

The decline in mortgage approvals signals that lending is likely to remain weak in the final months of this year as cost-of-living pressures and high borrowing costs make it harder for buyers to secure the homes they want.

We already know that house prices fell 4.6 percent in the year to August, according to Halifax, knocking £14,000 of the typical UK home, which now costs £279,569.

Incredibly, many vendors still haven't woken up to what's happening. Estate agents say they are still asking for too much for their property as they refuse to accept the world has changed.

It's no longer possible to get a mortgage at just one or two percent. The interest rate on newly drawn mortgages increased by another 16 basis points in August, from 4.66 percent to 4.82 percent. Many deals can charge as much as six percent.

First-time buyers are squeezed out of the market. Until recently, many were relying on the Bank of Mum & Dad to back their transaction, but now that source of funding is drying up, too.

A house price slowdown is inevitable, after the Bank of England's monetary policy committee (MPC) hiked interest rates at 14 successive meetings, from 0.1 percent to 5.25 percent.

So far, I've been optimistic that we can avoid a crash but it's going to be a close call. Now we need three things to happen to avoid meltdown.

The second thing we need is for both buyers and vendors to be a bit more realistic.

Estate agents report that buyers are reluctant to commit to buying a property today, because they reckon it will be even cheaper tomorrow.

Many are also holding back because they hope mortgage rates will fall further, due to today’s competitive market.

Vendors who want to seal a deal must be willing to be flexible on price. The danger with waiting is that they might get even less if the global economy turns really nasty, as it could.

This watch-and-wait attitude is in danger of killing off the market altogether.

Yet I'm still optimistic. Once there are signs the cost-of-living crisis has peaked, confidence may return. We've still got a massive housing shortage.

We will know more when September's inflation figure is published on October 16. A sharp drop – as some expect – will bury fears of higher interest rates and break the current impasse.

That's the third thing the market needs but there is one worry. Today's rising oil price could force inflation up and sentiment and house prices down. At speed.

We’re on a knife edge today, and so is the property market.