Around 56,000 mortgages were lent to people purchasing a property during the month, 7 per cent more than in June. The CML commented that while the increase reflected a seasonal rise in activity, the lending volumes still represented a “very weak market” during a period that is usually a strong part of the year.

There was a slight fall in the number of mortgages advanced to first-time buyers during the month, amid signs that banks and building societies were tightening their lending criteria again.

Around 19,400 loans were taken out by people buying their first home, 2 per cent fewer than during June, although it was still the second highest figure this year.

The average deposit put down by a first-time buyer remained at June’s level of 24 per cent, after falling to 21 per cent during the spring.

There was also a fall in the average income multiple lenders advanced to first-time buyers, with this dropping to 3.14 times their pay from 3.28 times in June.

The CML said: “Having eased during the early part of the year, loan criteria have now tightened a little.
“But low interest rates mean that interest payments continue to take up a relatively modest share of income.

“At 13.2 per cent this was down slightly from the previous month and the lowest it has been since early 2004″.

But despite interest payments remaining low, first-time buyers appear still to be having problems entering the market, with just 34 per cent of all mortgages for house purchase advanced to people taking their first step on to the property ladder during July, down from 38 per cent in June.

This was the lowest level since before the credit crunch first struck in August 2007.
By contrast there was a 13 per cent increase in the number of mortgages lent to previous homeowners who were buying a new property, at 36,900.

There was also a slight rise in the average deposit they were putting down at 33 per cent, up from 31 per cent, while the average income multiple they were lent also declined to 2.86 per cent from 2.9 per cent.

The number of mortgages taken out by people who were switching to a new deal remained unchanged from the previous month at 28,000, nearly a third lower than during July 2009.

The CML confirmed the number of interest-only mortgages which were taken out remained low during July at just 8 per cent among first-time buyers, compared with 29 per cent in July 2007.

Existing homeowners were slightly more likely to opt for an interest-only loan at 22 per cent among home movers and 24 per cent among those remortgaging.

The increase in the prevalence of repayment mortgages is likely in part to reflect the anticipation of regulatory changes by the Financial Services Authority to limit the availability of interest-only mortgages.

More generally, lending criteria remains tight, underpinned by caution on the part of both borrowers and lenders in the light of continuing economic uncertainty.