Savers have flocked to building societies in the wake of the Northern Rock crisis. New figures show that building societies recieved more deposits in January this year than in any January since 1997.

The Building Societies Association said that savers had depositied £597 million last month. Around £7 billion was saved in mutually owned buiding societies in the final three months of last year — only slightly less than the total savings figure in 2006 — as savers displayed a greater trust in the institutions after the run on Northern Rock.

Adrian Coles, Director General of the BSA said: “The January figures often show a net outflow as families pay off Christmas bills, with seven of the previous ten years seeing net withdrawals. Placed in this context, the savings inflow in January was particularly high.

"The attractive savings products that societies are offering, coupled with the volatility of share prices, have attracted savers into societies, while the continuing economic uncertainty is encouraging further saving."

Savers are favouring building societies despite the fact that they are covered by the same rules as banks under the financial compensation scheme. If a mutual collapses, only the first £35,000 of each saver's deposits will be returned to them.

Mutuals are not owned by shareholders: instead, ownership is shared between all members and profits are ploughed back into the society.

The figures came as the Bank of England said that the the number of mortgage approvals for new house purchases rose slightly in January to 74,000, up from 72,000 in December. The total is about 40 per cent lower than the number of home loans approved in January last year and is the second lowest figure since September 1995.

Experts welcomed the news that the recent slide in mortgage approvals had stopped, but were not overly optomistic about activity in the housing market in the coming months, especially as lenders move to tighten their lending criteria.

Vicky Redwood, UK economist at Capital Economics said: "We wouldn’t be surprised if mortgage approvals resumed their downward trend before long. Although the RICS balance of new buyer enquiries has levelled off in the past couple of months, mortgage lenders are continuing to tighten lending criteria, the latest news being Lloyds TSB’s decision to stop giving mortgages to borrowers with less than a 10 per cent deposit."

Howard Archer, of Global Insight, said: "It seems highly likely that house market activity and prices will continue to be dampened markedly by the combination of stretched affordability and tighter lending practices."

Nationwide said today that house prices fell by a further 0.5 per cent in February, marking the fourth successive monthly decline. It took annual house price inflation to 2.7 per cent, its lowest level since November 2005.