The Council of Mortgage Lenders (CML) reports that mortgage lending increased by eight per cent overall in July.
This took it to the highest monthly level this year, up to £12.7 billion, a two per cent increase on July 2011 and up from £11.7 billion in June.
However, the CML warned that the figures should be treated with caution and that overall the property market remains “broadly flat”. It said that a clearer picture should emerge in September and that it was too early to say if the Bank of England's Funding for Lending scheme was making it easier for potential homeowners to get a mortgage.
The level of mortgage lending is still way below long-term normal averages and data in 2012 has "see-sawed", partly due to one-off factors such as the influence of the Queen's Diamond Jubilee and the London Olympics.
Since the credit crunch of 2008, lenders have tightened lending criteria and most potential buyers have to find 20 per cent of the asking price before being accepted for a mortgage. This has led to the number of property sales to fall by 50 per cent compared to the normal level of transaction before 2008.
CML market analyst Caroline Purdey said: "Gross mortgage lending showed an 8% increase from last month, continuing the see-saw pattern seen throughout this year, albeit against a broadly flat market.
"Interpretation of recent trends continues to be challenged by one-off effects. We look forward to the September figures when the distorting effects of the Diamond Jubilee and the Olympics should largely have worked their way through”.
Ashley Brown, director of independent mortgage broker, Moneysprite, said: "Much like the property market, the mortgage market is down one month, up the next.
"Until lenders start lending consistently at higher loan to values, the mortgage — and subsequently property — markets are destined to cruise.”
Analysts are hoping that the Bank of England’s Funding for Lending scheme will help boost the flagging property market.
It offers cheaper loans to lenders provided they pass on the money and lend to individuals. In recent weeks there has been an influx of competitive medium-term fixed rate deals but these have only been offered to homeowners or first-time buyers with a deposit of at least 40 per cent. It is hoped that in the coming weeks there will be better deals introduced for those with less equity.
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