Mortgage lending has dropped by 13% in August.

Mortgage lending has dropped by 13% over the last month, according to the Council of Mortgage Lenders (CML).

It totalled an estimated £12.6 billion in August, representing a decline of 13% from July’s revised total of £14.5bn; however a seasonal fall in lending activity in August is to be expected.

Gross lending in the month was still more than a third down on the August 2008 figure of £19.9bn.

Taking into account this seasonal decline, the CML suggests that underlying lending levels appear to have stabilised during the summer, with stronger lending for house purchase balanced by lower levels of remortgaging.

This trend is unlikely to change for the rest of this year, with a pick-up in housing market activity checked by continuing funding constraints and a lack of ability or incentive to remortgage.

In the CML monthly market commentary published today, CML economist Paul Samter said: “The likelihood of a significant pick-up in lending remains weak, but the prospects for wholesale funding markets are improving. This could result in a gradual easing in constraints on the supply of funding over time. However, demand from consumers and a prudent approach to lending criteria are likely to mean that the market remains subdued.”

Recent figures from banks and building societies have also shown an upturn in approvals for house purchases as buyers have started to return to the market, encouraged by low interest rates and signs that house prices may have stopped falling.

The Council of Mortgage Lenders’ members are banks, building societies and other lenders who together undertake around 98% of all residential mortgage lending in the UK. There are 11.1 million mortgages in the UK, with loans worth over £1.2 trillion.

The September gross lending estimate will be published on 20 October 2009.