Mortgage lending stablised in July according to figures from the Council of Mortgage Lenders (CML).

The number of mortgages provided for house purchase (just over 47,000) remained broadly the same as in June and re-mortgaging recovered strongly to rise by 14 per cent compared to the previous month.

Mortgage lending remains subdued compared to last year and is still half the level of last July.  But the new figures give hope that the steady decline in lending may be coming to an end.  That would not necessarily presage a recovery in lending, but might suggest the number of loans approved for house purchase will not fall further. 

Re-mortgaging too remains well below levels seen last year, but the rise in the number of borrowers switching lenders reflects a succession of cuts in interest rate charges by all the major lenders.  Although the Bank of England has yet to cut the base rate (currently at 5.0 per cent), the City is expecting sharp falls in interest rates next year.  This is allowing lenders to borrow money in the future more cheaply than current official rates might suggest and so offer lower rates to borrowers.  Price comparison site moneysupermarket.com reported recently that nine of the UK's main 12 main mortgage lenders have reduced their two or three-year fixed rates in the last two weeks.  And according to Moneyfacts, the average cost of a two-year mortgage has dropped to 6.39 per cent from a peak of 7.08 per cent in early July.

Greater competition between lenders, albeit currently for existing home owners with good deposits, is expected to be one of the drivers of an improvement in mortgage availability over time.  Lenders make their money from lending and most have seen the number of loans they issue fall by around half compared to 12 months ago.  In theory, attempts to re-build their business from current depressed levels should see lenders offering better terms to a wider range of borrowers as time goes on.  The recent cuts in mortgage costs may be the first tentative signs that that is starting to happen.