Mortgage lending hits new heights amid gloom alert

Mortgage lending increased by 5% during July to its highest for a year but the Council of Mortgage Lenders remained extremely cautious about the outlook for the property market.

The CML, whose members lend 94% of all mortgages in the UK, said lending in the month hit £13.6 billion. That was 5% up on the previous month but still down 3% on July 2009.

Paul Smater, CML economist, said: "It is difficult to see anything other than a slow market for the rest of this year as underlying activity remains subdued.

"The rest of 2010 is likely to see rather lower lending and transaction numbers compared to the same period last year."

Future months' figures will look lower when set against 2009 due to the surge in transactions then as sellers rushed to offload before the end of the stamp duty holiday.

The CML predicts lending will total £140 billion for the year as a whole.

Banks have been accused of being too reluctant to lend, particularly to first-time buyers or those seeking larger loan-to-value mortgages, but Smater said current homeowners had benefited from low interest rates and will continue to do so.

"For most homeowners, the situation is not too bleak," he said, adding: "While there are a range of risks to the outlook, low rates will further help most stay on top of their finances."

RBS economist Ross Walker said: "There has been a cooling in the market as the number of new approvals has flattened. There is no evidence of a pick-up and I expect there will be a steady drift downwards."

Robert Bailey, a Chelsea estate agent, said: "Some foreign investors, mainly from Europe, have seen up to a 40% reduction in their real estate investments due to the relative weakening of the euro and are therefore cautious of further investments in the near term.

"We are now much more dependent on the domestic demand, which in the current climate is a cause for concern.