Mortgage lending increases slightly

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A total of £24.8 billion was advanced during the month, 5% more than during June and the highest figure since April, according to the Council of Mortgage Lenders.

But lending volumes were still 27% lower than they were in July 2007 as the combination of the credit crunch and house price falls continued to take their toll on the market.

Bob Pannell, CML head of research, said: "While there was a small month-on-month increase in activity, it represented a notable decline from a year ago.

"This continues the weaker picture seen in June and points towards the more subdued levels of lending we are likely to see in the second half of 2008."

The figures came as market analyst Datamonitor said it expected the UK mortgage market to shrink by nearly 20% this year.

The group said the outlook for the market was bleak, with the ongoing problems caused by the credit crunch leading to fewer lenders operating, a shrinking number of products, higher prices and more consumers being refused credit.

It predicts mortgage lending will fall by 19.3% this year, with total advances of £293.55 billion made during the year.

The figure is in stark contrast to growth of 19.7% recorded during 2006 when the market was booming, while advances rose by a further 5.4% in 2007 to peak at £363.8 billion.

But Datamonitor's prediction is more optimistic than the CML's own forecast, with the trade body expecting total mortgage advances to slump to £285 billion this year.