The number of mortgages approved for house purchase rose slightly during January but lending levels continued to fall, figures showed today.
A total of 23,376 mortgages were approved for people buying a home during the month, the highest level for four months and up from 22,416 in December, the British Bankers' Association said.
But the figure was still 43 per cent lower than in January 2008, while net mortgage lending fell to its second lowest level since April 2001.
Net lending, which strips out redemptions and repayments dropped to £2.9bn during the month - nearly half the level seen in January 2008.
However, the value of total mortgage advances made in January remained unchanged from December at £9.9bn.
There was also a slight increase in the number of people remortgaging, with 30,710 loans approved for people switching to a better deal during the month, up slightly from 30,500 in December but still 60 per cent lower than 12 months earlier.
There has been a steep fall in the number of people taking out a new mortgage when their current deal ends, partly because house price falls have left many people without the big equity stakes lenders now demand in order to get the best rates.
Historically low interest rates have also led to steep falls in lenders' standard variable rates, which most borrowers revert to when they come to the end of a deal, meaning many homeowners are better off staying where they are.
The BBA said: "January's approval activity, both in volume and value, was marginally above December, but continued to be at a very low level."
It added that lower borrowing costs and falling property prices had "underpinned" demand for mortgages from the high street banks, who it said were currently providing more than two-thirds of new mortgage lending.
Demand for unsecured credit remained subdued during January. Consumers spent a total of £6.1bn on their credit cards, in line with previous months.
However, after repayments of £6.3bn were taken into account, outstanding credit card debt rose by £253m, slightly up on the previous six month average.
Borrowing through overdrafts and loans fell by £111m in January, the third month in a row in which it has declined.
But there was a steep fall in the amount of money people had saved during the month, with deposits dropping by £2.2bn in January.
The group said this partly reflected people spending their savings, but was also due to them moving their money into alternative, higher yielding assets, following the reduction in deposit rates.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "The modest rise in mortgage approvals in January adds to the overall evidence that housing market activity may have bottomed out.
"Nevertheless, it is still at an extremely low level which suggests that further significant falls in house prices are likely.
"Furthermore, while latest survey evidence indicates that buyer inquiries are now picking up significantly as people are attracted by lower house prices and the Bank of England slashing interest rates, we are sceptical that this will lead to a marked rise in actual sales anytime soon."