Gross mortgage lending rose by 9% to an estimated £27.5 billion in August, up from £25.2 billion in July, according to the Council of Mortgage Lenders. This was one of the highest figures on record, 4% higher than the £26.5 billion of August 2004, and the highest figure since July 2004.

There was an increase in all types of lending, although the most pronounced increase was in remortgaging. Remortgaging went up by 15% to £11.7 billion in August from £10.2 billion in July, reaching its highest level since October 2003.

This probably reflects borrowers taking advantage of lower interest rates and remortgaging into cheaper deals, especially as a large number of people will have been coming to the end of their previous deals. But as a proportion of total business remortgaging rose only slightly, from 41% in July to 43% in August.

Lending for house purchase rose by 6% to £12.5 billion in August, up from £11.8 billion in July, but down slightly on the £12.8 billion recorded last August. Lending for house purchase accounted for 45% of lending, down from 47% in July and 48% last August.

The number of loans for house purchase rose from 96,000 in July to an estimated 101,000 in August. However, this was still below the 110,000 in August last year. First-time buyers accounted for 30% of this total, very similar to the proportion throughout the past year (which has varied from 28%-32% on a monthly basis).

Further advances accounted for 8% of gross lending, broadly the same proportion as last month, but rose in terms of value by 11% from £1.9 billion to £2.1 billion. Further advances (typically used to finance home improvements) have been hovering around the £2 billion monthly level since March.

Affordability maintained a similar picture to previous months:

• Typical first-time buyers borrowed around 87% of their property value, representing 3.22 times their income.
• Typical movers borrowed 68% of their property value, representing 2.95 times their income.

However, the pricing of both fixed and variable-rate products continued to fall, with the average fixed rate in August at 5.23% and the average variable rate at 5.61%. The pricing differential between fixed and variable rates prompted a further increase in the popularity of fixed-rate business, which accounted for 54% of all loans in August, the highest proportion ever since monthly records began in 1998.

Commenting on the figures, CML director general Michael Coogan said: "The doom-mongers' prophecies look to have been wrong, as lending has continued to strengthen over the summer. Although the market remains far from spectacular in terms of transaction numbers and house prices, the prospects of a significant market correction are receding."

"The fact that the housing market is holding up is likely to be welcome news for the MPC, as it struggles to reconcile the very different pictures emerging from different sectors of the economy. We continue to expect a moderate market for the foreseeable future."