The latest figures from the Bank of England show that mortgage lending in the UK plunged by more than 60 per cent during January, falling to just 10 per cent of its level 12 months ago.

Net mortgage lending was £690 million during the month, down from £1.79 billion in December. It was the second lowest monthly total recorded by the bank since it began to keep statistics in this format in April 1993, and represented a steep dive from the £6.9 billion lent in January last year. It was less than half of analysts' predictions for a £1.5 billion increase. Mortgage lending has fallen from a peak of about £10 billion per month at the height of the market boom.

The total number of approvals for home loans was largely stable at around 31,000 in January, the bank said. Separate figures from Hometrack, the housing data group, suggest the average house sale price is now 88 per cent of the figure at which a property is first marketed.

This reinforces the message coming from all parts of the property market - that househunters are demanding bargains amid forecasts of further price falls.

However, Hometrack's numbers do present evidence of signs of life in a previously moribund market, with new buyer registrations rising by 17 per cent and agreed sales up by 36 per cent in February, after falls in the previous few months. A few agents are reporting multiple bids for some properties, with correctly priced homes going under offer relatively quickly.

However at the same time, a survey has shown that British manufacturers slashed jobs and output at a record pace in February as export orders plunged. UK manufacturing shrank for the tenth consecutive month and consumer lending rose at the slowest pace since at least 1993, evidence Britain's recession is intensifying, the Chartered Institute of Purchasing and Supply and Markit's research said in a report today.

Net consumer lending increased in January by 1.1 billion pounds, a 15-year low, the Bank of England said.

Monday's manufacturing reading is the weakest since the index reached a 17-year low of 34.5 in November. A measure of employment and production contracted at the fastest rate in the survey's history, CIPS and Markit said.

The British economy contracted at the sharpest pace since 1980 in the fourth quarter and joblessness rose to a 10-year high in January. House prices dropped an annual 10 per cent last month, Hometrack Ltd said.

Prime Minister Gordon Brown's government last week instructed Northern Rock, the nationalised mortgage lender, to expand lending by 14 billion pounds and is guaranteeing assets for Royal Bank of Scotland Group Plc to prevent its collapse.

The survey will add to widespread expectations that the Bank of England will cut interest rates by half a percentage point this week to a record low of 0.5 per cent.