Gross mortgage lending hit its highest level for September since 2007 but fell on a monthly basis, new figures reveal.

The Council of Mortgage Lenders estimates that gross mortgage lending reached £20.5 billion in September, 7% lower than August’s lending total of £22.1 billion.

Lending is 2% higher than the £20.1billion lent in September last year and is the highest September figure since 2007 when gross lending reached £29.9 billion.

On a quarterly basis, gross mortgage lending for the third quarter of 2016 was an estimated £63.6 billion, which is 11% higher than the second quarter of this year and 4% higher year-on-year.

Mohammad Jamei, CML economist, said: “Remortgage activity looks set to grow, helped by attractively priced mortgage deals encouraging borrowers to refinance. Prospects for house purchase activity continue to look slightly subdued when compared to the same period a year ago.

“Despite this, housing market sentiment continued to improve in September after recovering in August. As a result, we expect a modest rise in approvals, though at levels lower than seen earlier this year, as the lack of properties on the market for sale and affordability constraints continue to bear down on borrowers.”

Andrew McPhillips, chief economist at Yorkshire Building Society, said: “In order to help more people to achieve their goal of owning a property, the UK must build more homes to bring supply in line with demand and reduce house price growth to make houses more affordable.

“The Government should also consider introducing measures to help more people on to the property ladder in the short-term, such as by making stamp duty a seller’s tax instead of a buyer’s tax to reduce costs for first-time buyers and those moving up the property ladder.”