Mortgage lending rose in January – although growth is still slowing – while savings levels dropped.

Net mortgage lending rose by £2.9 billion, but this was down from the six month average of £3.4 billion, according to data from the British Bankers’ Association (BBA).

Gross mortgage lending stood at £9.9 billion – a fall of 45.2 per cent on a year ago.

The value of approved mortgages was down 59.4 per cent on a year ago – but is now up for the second successive month after approvals hit 23,376 in January – compared to 22,416 in December and 17,574 in November, the lowest level on record.

A total of 23,376 home purchase mortgages and 30,710 remortgage deals were approved – an annual fall of 22.8 per cent and 7.1 per cent respectively.

BBA statistics director David Dooks explained demand for mortgages has come from low interest rates and falling house prices.

“Lower borrowing costs and falling property prices have underpinned demand at high street lenders, who are providing over two-thirds of all new mortgage lending,” he said.

The BBA data also showed a fall in savings.

Personal deposits in January fell by £2.2 billion – as savers switched funds into alternative financial products as standard savings rates dropped.

Fewer personal loan and reduced credit card spending was also reported.

New loans fell by 36.1 per cent and £200 million more was repaid on credit cards than spent.

Howard Archer, chief UK 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 enquiries 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.”

He explained many people are likely to be looking at houses pretty casually and will probably be very cautious about committing to buying a house in the current economic environment.

“Consequently, only a major bargain is likely to tempt them into actually buying a house,” he added.