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Mortgage lending up but market still subdued

Mortgage lending rose for the third consecutive month during July to reach its highest level for a year.

A total of £13.6bn was advanced during the month, 5% more than in June and the highest level since July 2009, according to the Council of Mortgage Lenders.

But the figure was still 4% down on the £14bn that was lent during the same month last year and the group warned that lending levels were likely to remain subdued for the rest of 2010.

Paul Samter, 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.

"Late 2009 saw a pick-up as some home buyers looked to move before the end of the first stamp duty holiday."

But he added that while lending levels are likely to be lower than expected, the vast majority of homeowners are not facing problems paying their mortgages.

The group expects 39,000 people to have their homes repossessed this year, down from its previous forecast of 53,000.

Data from the Bank of England, yesterday showed a slower mortgage market. The bank's trends in lending report said the number of mortgages approved for house purchase "edged down" in July.

It added that the availability of secured credit had not changed significantly since the beginning of the year, despite more mortgage products coming on the market.

The major lenders expect mortgage lending to remain subdued in the coming months.

Andrew Montlake of mortgage brokers Coreco, said: "The modest rise in mortgage activity since May has been set against a low base, and although there has been a rise in products for borrowers, and more lending, the mortgage landscape is by no means close to returning to normal."