Mortgage lending dived by more than 60% during January to just one 10th of its level 12 months ago, figures showed today.

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

It was the second lowest monthly total recorded by the Bank began since it began to keep statistics in this format in April 1993, and represented 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.

Vicky Redwood, UK economist at Global Insight, said the latest lending figures showed that the housing market remained in a "pretty sorry state".

She said: "While housing market activity seems to have reached a floor in the past few months, there is still very little sign that the pick-up in new buyer interest is feeding through into actual purchases."

Howard Archer, chief UK and European economist, at Global Insight, was also sceptical that increased interest would lead to a marked rise in actual sales "any time soon".

He said: "Although housing market activity may well now have bottomed out, it is still at an extremely low level which suggests that further significant falls in house prices are highly likely."

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.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said the figures on mortgage approvals continued to highlight the urgent need for more funds to be injected into the mortgage market.

He said: "Despite three consecutive monthly increases in the RICS 'buyer inquiries' series, the actual level of new mortgage approvals continues to languish.

"This disconnect between buyer inquiries and actual mortgages approved highlights the inability of many buyers to access the property market at the present time because of the substantial deposits being sought by lenders."

Unsecured lending remained subdued during January, rising by £403 million, which was higher than December's figure of £271 million, but below the recent six month average.

Within the total, credit card lending rose by £296 million, while borrowing through loans and overdrafts was £107 billion higher.

Consumer credit is expected to remain subdued during the coming months as lenders continue to tighten their criteria for unsecured advances.

The Building Societies Association also released figures today showing that net mortgage lending turned negative in the sector during January, with homeowners repaying £491 million more than they borrowed.

There was also a steep fall in the value of mortgage approvals, with a total of £347 million of loans approved, down from £836 million in December and £3.22 billion in January 2008.

Savings held with building societies dropped in January, as people withdrew £390 million more than they saved during the month, although the group said this was a usual seasonal trend as people used their savings to pay for Christmas spending.

It added that during 2008 1.2 million additional savings accounts were opened with building societies, with savings levels in the sector rising by £9.92 billion.