Mortgage lending fell to a record low in January, further highlighting the dire state of the housing market.

Lenders granted £12.4 billion last month, down 8.4 per cent from £13.5 billion in December and down 52.1 per cent year-on-year, figures from the Council of Mortgage Lenders show.

Bob Pannell, the head of research at the CML, said that the situation was unlikely to improve soon. “Mortgage lending activity continues to be very weak and while people are searching eagerly for some signs of recovery, it would be unrealistic to expect a meaningful revival in lending in coming months. Even when conditions do improve, gross lending will be one of the later measures to recover," he said.

Separate surveys have shown a rise in buyer inquiries as bargain hunters look for plum properties at rock-bottom prices but analysts said it was unlikely that this would be enough to turn the tide.

Howard Archer, of IHS Global Insight, said: "Many people are likely to be looking at houses pretty casually and will probably be very cautious about committing to buying in the current economic environment. Consequently, only a major bargain is likely to tempt them into actually buying a house."

In addition, some estate agents report that interest is coming from cash buyers, who do not need mortgages.

The lack of activity in the housing market has dragged prices down by 20 per cent since the market peaked in autumn 2007 but economists expect prices to continue to fall.

"We continue to expect house prices to fall by a further 15 per cent in 2009 and by 5 per cent in the first half of 2010 on the Halifax/Nationwide measures before stabilising. This would take them some 35 per cent below their autumn 2007 peak levels," Mr Archer said.

This came as the Department of Communities and Local Government reported that work started on only 16,310 houses in England in the final three months of last year. This was down by 26.6 per cent from 22,230 in the third quarter and by 58.1 per cent from 38,930 in the fourth quarter of 2007.

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