Mortgage lending fell 52 per cent on a year ago in January, according the data from the Council of Mortgage Lenders (CML), making it the lowest since 2001.
Gross mortgage lending last month stood at £12.4 billion – eight per cent down from December.
Bob Pannell, CML head of research, said: “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.
The CML explained January normally does see a fall in lending – but the level is still the lowest in eight years.
"Even when conditions do improve, gross lending will be one of the later measures to recover.”
Over 2008 gross mortgage lending hit £257.6 billion – compared to £363.7 billion in 2007.
Andrew Montlake, partner at mortgage broker Cobalt Capital, said: "The January lending figures are a joke.
"Enough is enough. It's time for the government to get the gloves off and force the banks to lend.
"The health of the wider economy is inextricably linked to the health of the property market, and the property market, despite the fact that interest levels are up, is still very unwell."
Last week Royal Institution of Chartered Surveyors (Rics) reported its members were making the lowest number of sales on record.
However, some hope was drawn out from the figures, as a rise in buyer enquiries was noted.
Jason Bolton, a mortgage expert at Rubii.co.uk, said: "As the Rics survey earlier this week revealed, people suspect that now and the months ahead could be the ideal time to buy property.
"If we're not at the bottom of the market, they sense that we're there or thereabouts and recognise that borrowing rates are low. The issue, as ever, is can prospective buyers get a mortgage and will they commit to a purchase anyway given the febrile state of the economy?
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