Mortgage lending increased slightly in June but still remains lower than a year ago, the latest data has revealed.
Although gross lending of £12.6 billion was the highest monthly total since July last year, the Council of Mortgage Lenders (CML) said the weak economy continued to hold activity in the housing market back.
The figure represented a 16% increase from the £10.8 billion lent in May but was 3% lower than June 2010, when £13.0 billion was lent.
"The UK economy continues to experience disappointing economic growth, strong consumer price pressures, falling disposable incomes and an uncertain jobs market," said the chief economist at the CML, Bob Pannell.
"This backdrop weighs negatively on purchase decisions relating to home ownership."
By contrast, he noted that landlord activity appears to have recently picked up and should help to underpin activity over the coming months.
Despite the subdued state of the market, Pannell said households had made progress in bringing down debt burdens over the past year, although this largely resulted from the lower levels of new mortgage lending.
"Households in aggregate are not repaying their mortgage debt more quickly," he added.
In terms of recent headlines suggesting home repossessions could soon start to rise significantly, Pannell said the situation appeared to have been overplayed, given that large interest rate rises are unlikely in the foreseeable future.
"But we do expect to see moderately higher arrears and possessions through the second half and into 2012, as we have previously forecast," he added.
Paul Hunt, managing director of Phoebus Software, said lenders are pricing their products increasingly competitively, giving borrowers the chance to maximise the benefits of the likely continuation of low rates for the rest of this year.
"This has improved mortgage affordability and means lenders can put their hands in their pockets knowing the rates they offer are unlikely to break the bank for borrowers – even though economic conditions remain uncertain," he added.
"This isn't yet enough to prevent the UK 's housing market from stagnating, but it's a very encouraging sign indeed."
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