Figures from the Council of Mortgage Lenders show that gross mortgage lending fell 32% in January from £13.4bn in December and dropped 21% from £11.5bn in January 2009.
The CML says that although a decline is to be expected between December and January, the £9.1bn gross lending figure is the lowest monthly total since February 2000 and the lowest January total since 2000.
The trade body says that the larger than average drop between December and January confirms its view that house purchase activity was boosted by borrowers trying to complete their purchase ahead of the end of the Stamp Duty holiday on December 31.
Paul Samter, economist at the CML, says: “We remain in a period of uncertainty for the housing market and economy at large.
“More recent developments have been influenced by the end of the Stamp Duty holiday, and are likely to foreshadow a larger than usual seasonal drop off in activity in the early part of this year.”
But he adds: “The Bank of England is likely to keep rates low which should continue to mitigate mortgage payment problems and help cushion borrowers from the worst of the recession.”
Brian Murphy, head of lending at Mortgage Advice Bureau, says that the January data is due to the time of year and the rush to beat the end of the Stamp Duty holiday and that overall mortgage availability is at a 12-month high.
He says: “This time last year the mortgage market was in a coma, but in the past three to four months a lot more products have become available, as lenders once again start fighting for market share.
“But while more competitive rates are starting to emerge at higher LTVs, you still need a faultless credit history if you are to secure a loan.”