Mortgage lending in 60% plunge

The Bank of England said net mortgage lending, which strips out redemptions and repayments, was £690 million during the month, down from £1.79 billion in December.

It is the second lowest monthly total recorded by the Bank since it began to keep statistics in this format in April 1993, and represents a steep dive from the £6.91 billion lent in January last year.

Total mortgage advances slumped to £13.64 billion in January, a level last seen in July 2001.

But the number of mortgages approved for house purchase remained steady at 31,000, in line with both the previous month's figure and the recent six-month average.

Estate agents have reported a pick-up in interest during recent weeks as steep interest rate cuts and house price falls tempt potential buyers back into the market.

But this interest has yet to translate into higher sales and, even if consumers are now more willing to buy a property, they are still likely to struggle to get the mortgage they need.

The number of people remortgaging continued to fall during January, dropping to 34,000 - less than half the 72,000 who switched home loans in October.

The steep drop in remortgage numbers is likely to have been caused by lower interest rates making it cheaper for many people to remain on their lenders' standard variable rate, which they revert to at the end of a deal, rather than take out a new mortgage.

House price falls of more than 20% will also have eroded the level of equity many people have in their property, making it difficult for them to switch provider or qualify for the best rates.