Mortgage lending in the UK is rising at its slowest rate since January 2002, according to the Bank of England. However, the figures confirm that a gradual recovery in housing market activity remained on track.

The number of new mortgage approvals - loans agreed but not yet made - were a seasonally adjusted 97,000 in July, up slightly from 96,000 in June. Approvals have been edged up 2.1% over the past three months.

Compared to a year earlier, mortgage approvals are only 1% lower, and contrast with a more dramatic fall of 42% last November, confirming that market conditions have now stabilised. Still, mortgage approvals in July moved slightly above their long-run historical average of 96,000 per month for the first time since July 2004.

The Royal Institution of Chartered Surveyors believes the Bank of England figures confirm a gradual recovery in housing market activity remained on track in July.

Household sentiment has held up in the face of a mild economic and labour market slowdown. In addition, a growing sentiment over the summer months that interest rates had peaked provided prospective buyers with further confidence to enter the housing market.

More timely statistics from chartered surveyors estate agents indicate that buyer purchase enquiries rose in July for a second consecutive month. RICS expects housing market activity to continue firming slowly in the months ahead, helped in part by the August interest rate cut, a benign economic climate, and factors such as the number of job vacancies which is still holding at relatively high levels.

The increase in total net lending to individuals in July (£7.7 billion) was lower than in June and lower than the previous six-month average, the Bank of England said.

Within the total, the increase in net lending secured on dwellings £6.5 billion) was weaker than the increase in June and weaker than the previous six-month average. The twelve-month growth rate fell to 10.4% in July, from 10.8% in June.