Banks’ net mortgage lending grew 1.7pc

Figures from the British Bankers’ Association showed banks’ gross mortgage lending of £7.6bn in July was similar to June’s total and 8% lower than in July 2010.

The BBA believes that with the continuing weakness in both house purchase and remortgaging approvals, gross mortgage lending is largely stable. With repayments continuing at a fairly high level, net mortgage lending increased by just £0.9bn in July.

House purchase approvals were higher than in June and slightly higher than in July 2010. The average value (£151,500) was 2% higher than a year earlier.

The number of remortgage approvals in July was higher than in June and 14% higher than July 2010. Reports suggest that remortgaging may have been stimulated by some growth in the buy-to-let market.

Approvals for equity withdrawal continue to be stable, as homeowners use the historic appreciation in the value of their homes as security for borrowing.

BBA statistics director, David Dooks said: "The high street banks have provided almost three-quarters of all new mortgage lending during the last two years when the mortgage market has been very subdued.

"Overall, companies' appetite for finance remains low, reflecting business decisions in difficult trading conditions - new finance made available to one company is simply being offset by debt repayment from another.

"Demand for borrowing from both households and companies continue to be weak reflecting the slow growth in the economy."

Brian Murphy, head of lending at independent mortgage broker Mortgage Advice Bureau, said: "Although mortgage lending is up in July we shouldn't get carried away on the back of one set of figures.

“Despite some very competitive fixed and tracker rate deals on the market, the return of higher loan to value mortgages and lenders relaxing their borrowing criteria, mortgage lending is still subdued - and July figures reflect mortgage applications made before the summer holiday period, when historically mortgage lending drops off.

"A stronger indicator as to the health of the mortgage market will be mortgage applications made in September and October. In a healthy market we would expect to see an uplift in numbers post summer vacations, but whether this will happen is anybody's guess.

"The problem doesn't lie with the lending environment, which is highly attractive at the moment. The problem lies with consumers feeling the financial pinch. With household bills escalating as food and energy prices continue to rise, this higher general cost of living is putting a squeeze on the amount of spare cash families have at the end of every month to put away in a house deposit fund.

"As a result, rather than new borrowers taking advantage of the low interest rate environment, it's existing homeowners taking the opportunity to pay down their mortgages."

Capital Economics said: “July’s rise in mortgage approvals extends to three months the period over which mortgage market activity has been on the increase. But with the economic recovery hitting the buffers, this is unlikely the mark the start of a sustained upturn in mortgage approvals.”