Mortgage lending rose by nearly 7 per cent during October but it remained well down on 12 months ago, figures showed today.
A total of £18.7 billion was advanced during the month, compared with just £17.5 billion during a "weak" September, the Council of Mortgage Lenders said.
But the figure was still 44 per cent lower than the £33.38 billion lent in October 2007, and it was also down on August's advances of £19.66 billion.
Despite the increase in lending during October, the Council of Mortgage Lenders (CML) warned that demand was likely to remain subdued due to falling house prices and the deteriorating economy.
Michael Coogan, director general of the CML, said: "While lending in October ticked up from a low figure in the preceding month, the outlook is one of continuing weakness for housing and mortgage markets in the coming months, despite the Bank rate cuts in October and November.
"Consumer confidence is now being affected by the worsening economic outlook. However, any recovery in lending is also being held back by the continuing shortage of mortgage funding.
"The Government should therefore publish the delayed Crosby Review as part of the forthcoming Pre-Budget Report and announce concrete steps that will enable and encourage firms to increase mortgage loans."
Mortgage lending is continuing to be constrained by the problems in the wholesale money markets, leaving banks struggling to raise the funds they need to lend to consumers.
The Government is due to respond to a review on mortgage finance, carried out by former head of Halifax Bank of Scotland Sir James Crosby, in the Pre-Budget Report on Monday.
The report's recommendations, which have not yet been made public, may include some form of Government support to get the mortgage-backed securities market working again.
But in his interim report published in July, Sir James said the Government and the Bank of England should steer clear of propping up the mortgage market, and any intervention he suggests is likely to be only on a temporary basis.
October's increase in mortgage lending is consistent with other indications showing a slight improvement in the housing market during the month.
The National Association of Estate Agents said earlier this week that the number of sales agreed during October increased for the second month running to seven, up from a record low of just five in August.
Lettings agency Your Move also said today that it had seen a slight fall in the number of people moving into rented accommodation in October, with the number of leases started during the month falling by 2.35 per cent compared with September.
David Newnes, managing director of Your Move, said: "The minor slowdown in demand for let accommodation in September was sparked by the global interest rate cut and resulting confidence boost - our sales side saw a small lift.
"But rental demand overall this year has been extraordinary - this is the busiest we've ever been in lettings."