Mortgage lending hits highest level in two years

Gross mortgage lending rose to its highest in more than two years last month but the Council of Mortgage Lenders cautioned that the overall market remained flat.

Total lending was £13.4bn in August, up 6 per cent from July and 10 per cent from a year earlier, CML figures showed.

The monthly total was the highest since July 2009 and the strongest August figure since 2008 when £19.3bn was lent that month.

The CML's chief economist, Bob Pannell, said recent monthly lending figures had fluctuated and that the underlying picture was subdued but stable.

"The August performance more or less offset the weaker than expected July figure. Taking July and August together, lending has shown little change on the same months of 2009 and 2010," he said.

If lending trends follow the second quarter, a large share of the increase will be driven by remortgaging as borrowers take advantage of low mortgage rates. Buy-to-let investors are also capitalising on high yields as potential first-time-buyers are squeezed out.

However, other commentators held out hope that stronger figures could lure people into the housing market in a period that traditionally sees activity pick up after the summer lull.

Nicholas Leeming, business development director at the Zoopla property search site, said: "It's encouraging to see early positive signals in the lending market as the supply and demand imbalance in the UK is in desperate need of address.

"Strong early activity levels should encourage sellers to put their properties onto the market this autumn and more stock will help tempt more buyers to take advantage of low interest rates."