One of Britain's biggest mortgage brokers cut its workforce by a quarter and shut three offices yesterday, as figures showed that home loan approvals last month had sunk to an unprecedented low.

John Charcol, the mortgage broker sold by Bradford & Bingley at a £90 million loss four years ago, said that it had ousted Ian Kennedy, its chief executive, as it downsizes to prepare for a severe contraction in the mortgage market. Nigel Ward, the finance director, will also leave the company.

John Charcol said that its founders John Garfield and Charles Wishart and the long-time investor Jon Moulton had pumped an undisclosed sum into the business to give it working capital. This was on top of a £1.5 million injection by the founders in March to keep the broker afloat.

Mr Garfield will take over as executive chairman. He said yesterday that Britain faced “tough and turbulent times” and that the company's actions were necessary to ensure its survival and future profitability.

John Charcol said that it would lay off 39 workers across all divisions. This is on top of 30 sales staff who lost their jobs last month. The company has five offices left after shutting outlets in Manchester, Guildford and Birmingham.

Bank of England figures yesterday showed that the number of new mortgages approved for house purchase plunged by 28 per cent in May to 42,000, the lowest level since at least 1986. The number of loans approved is down by almost two thirds (64 per cent) from levels a year ago and stands at a third of levels at the peak of the housing boom in 2003. Approvals have sunk far below the levels seen at the worst point in the previous housing market downturn in the early Nineties.

Michael Saunders, an economist at Citigroup, said that he had expected house prices to drop by 20 per cent by 2010 “but the collapse in approvals suggests that a sharper drop”.

Actual net mortgage lending during May was also extremely weak, rising by £4.07 billion instead of £6 billion as the City had expected. Mortgage lending grew by 0.3 per cent, its weakest monthly rise for almost 12 years.

In a further sign of the pain in the housing market, Humberts, the estate agent, yesterday reported a first-half loss of £15.9million, down from a profit of £1.6 million last year. The company said that transaction volumes are about 50 per cent below last year's.