Gross mortgage lending up 26% in July

Gross mortgage lending totalled an estimated £16 billion in July, a 26% increase from £12.7 billion in June but down 36% from £24.9 billion in July 2008, according to new data from the Council of Mortgage Lenders.

This is further evidence of a modest improvement in the market over the summer after an exceptionally weak winter. However, activity is still subdued on any historic comparison; this is the lowest July lending figure since 2001 and £11 billion lower than the July average over the previous seven years of £27 billion. Lending volumes remain consistent with our forecast for £145 billion in gross mortgage lending this year.

Advances have picked up in June and July as anticipated. There is typically a strong seasonal rise over the summer months as a whole. The increase is likely to have been driven mainly by a rise in house purchase activity, rather than remortgaging activity, as low reversion rates continue to limit the attraction of refinancing.

In this month's market commentary, CML economist Paul Samter observes: "Most of the indices point to house prices rising modestly over the summer months. The CML's July gross lending estimate of £16 billion is the highest level in nine months and consistent with the rise in house purchase approvals.

"But the bounce-back in activity from the extreme weakness around the turn of the year, coinciding with a seasonal bounce, is limited in how far it can go against the current back-drop. We expect improved sentiment to support the market, but a further significant pick-up is unlikely with so many obstacles in place. As a result, we anticipate some seasonal slowing in lending volumes and housing transactions over the latter part of the year and the picture of a slow but more stable market to emerge."