17% surge in mortgage lending level

A total of £12.3 billion was lent during June thanks to a seasonal pick-up in house-buying activity, according to the Council of Mortgage Lenders (CML).

Its latest statistics reveal that gross mortgage lending stood at an estimated £33.3 billion for the second quarter, although this was unchanged from the first three months of the year, which was the lowest quarterly reading since early 2001.

The CML said lending levels were likely to rise moderately throughout the rest of the summer months. But it warned the ongoing clampdown among lenders would hold back any significant improvements and stuck to its annual forecast for £145 billion in gross mortgage advances.

While June's estimated lending figure confirms signs of better property market conditions in recent surveys, it also reveals the marked change in the sector since last autumn's financial crisis. Lending in June was 48% below the £24.8 billion seen last June, according to the CML.

Paul Samter, CML economist, said: "The combined effects of the restricted nature of mortgage funding, reduced number of active lenders, weak labour market and limited consumer demand are likely to hold back any significant and underlying improvement."

However, figures also out from property website Rightmove suggests the heavy house price falls may be behind the market.

Its figures for the month to July 12 show asking prices rose by 0.6% to an average of £227,864, marking the fifth monthly rise this year.

Howard Archer, economist at IHS Global Insight, said the CML data added to hopes that buyer interest has picked up and that property prices had bottomed out.

He added: "Much will clearly depend on whether the economy can sustain its recent overall improvement or suffers a renewed dip in activity, how much further unemployment rises, how quickly and to what extent credit conditions ease, and how many properties come on to the market over the coming months."