Gross mortgage lending totalled an estimated "12.5billion in September, a 2% rise from the £12.3billion in August but down 27% from September 2008, according to data from the Council of Mortgage Lenders.

Gross lending in the third quarter of 2009 was an estimated £38.9billion, an 18% increase from the second quarter and down 36% from the third quarter of last year.

Behind the modest improvement from August to September and the relative stability of recent months is the balance between the types of lending taking place - there has been a pick up in house purchase activity, but this is off-set by the decline in remortgaging.

CML economist Paul Samter said: "House buying activity is running at considerably higher levels than around the turn of the year. However, it remains weak on any historic comparison and is unlikely to rise much further given the constraints the lending community faces and a still difficult economic backdrop.

"But there are some positive signs to look to. While the retail side, both in terms of mortgage and savings activity, has thrown up few surprises, it is encouraging that the wholesale markets have begun to thaw. Some of the UK's highly-rated institutions have been able to issue structured finance products backed by mortgages in recent weeks.

This is only an early sign of wholesale investors tentatively coming back into the new issuance market, but is welcome nonetheless."

Meanwhile, Michael O’Flynn, Director of, said: "The 2% monthly rise in gross mortgage lending is very encouraging, especially as lending for house price purchases has shown significant improvement in recent months. Buyers are clearly becoming more confident that now is the time to buy, but lenders must review their strict lending criteria if we are to see a strong and sustained recovery.

"Many sensible borrowers with good credit histories are still unable to secure finance for a house purchase which is well within their means, and this has to change if growing demand from buyers is to translate into completed sales."

David Brown, commercial director of LSL Property Services, said of the figures: "This is positive news, but we shouldn't be jumping for joy just yet.

"A quarterly rise in gross lending is another step towards recovery in the housing market - but it will be a marathon, not a sprint. A return to the levels of 2008 - let alone those of 2007 - is still in distant view.

"The number of transactions taking place is being reined in by the limited supply of affordable mortgages to two crucial groups - first-time buyers and property investors. With house prices resurgent, and rents rising by an annualised rate of 13%, property purchase should be an attractive proposition for first-time buyers and landlords alike. Unless lenders begin to open their purse-strings and offer reasonably-priced mortgages and realistic loan to value multiples, the number of purchases by these two groups will continue to be restrained."

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