However, lending volumes are still weak on a historic basis.
There were 41,500 loans worth £5.9 billion advanced for house purchase in May, up from 40,800 (£5.9 billion in value) in April.
Despite the monthly increase in house purchase activity, it is still below the level seen in May last year (43,800 advances worth £6.3 billion).
Remortgage lending picked up slightly in May. 29,000 remortgage loans were advanced, worth £3.6 billion, compared to 24,700, worth £3 billion, in April.
Compared to May last year, remortgage lending has increased by 9% in value, but remains below the recent peak in March (£4.1 billion).
The majority of borrowers continued to opt for fixed rate mortgages in May (62%). It is likely that borrowers prefer the certainty of mortgage payments in a period when future interest rate movements are uncertain.
Only 22% of all borrowers chose tracker mortgages in May. This represents a significant change from May a year ago when fixed rates were less popular at 46% and tracker mortgages more popular at 36%.
Lending to first-time buyers was virtually unchanged in May. 15,900 first-time buyer loans were advanced compared to 15,800 in April. The value of these loans remained unchanged in May at £1.9 billion.
Compared to May last year, first-time buyer activity has fallen by 2.5% in volume (from 16,300) and 5% in value (from £2 billion).
First-time buyers borrowed on average 80% of their property's value in May for the second month in a row. This is still well below the 90% that first-time buyers typically borrowed before 2008, but has eased a little from the 75% experienced throughout 2009 and early 2010.
In May this year, only 3% of first-time buyers took out an interest-only mortgage. Before 2008, it was typical for around 30% of loans to first-time buyers to be on an interest-only basis.
The number of mortgages advanced to home movers edged up in May to 25,600 advances from 25,000 in April, while the value of loans advanced stayed the same (£4 billion).
This is an increase of 2.4% by volume compared to April. There were larger year-on-year falls in lending to this group than in the first-time buyer sector, down by 7% in volume compared to May last year.
Home movers have typically borrowed just below 70% of their home's purchase price since the middle of 2009 and this continued in May.
Michael Coogan, CML director general said:
"Over the coming months seasonal factors are likely to push up lending for house purchase. There is no evidence of any drastic changes on the horizon or any significant shifts in direction for the mortgage market. These stable conditions are expected to continue for the rest of the year.
"Funding market conditions appear a little more positive, for example, recent securitisation deals suggest confidence has returned as investors regain their appetite to invest in bonds backed by mortgage assets. Overall this is a positive influence on mortgage market conditions."
David Whittaker, managing director of Mortgages For Business, said:
“The lack of movement in the number of first-time buyer loans has put mounting pressure on an already over-loaded private rental sector. Tenants are scrapping for properties and rents are climbing as a result.
"This has provided more opportunities for professional landlords and property investors to capitalise on stagnating property prices, rising rents and increasing numbers of BTL mortgage products.
"Now is a prime time for investors to be considering their options and with the end of summer rental rush not too far away we expect investors keen to boost their portfolios to do so soon.”
Chris Gardner, a mortgage expert at Obligo.co.uk, said:
"The May uptick comes on the back of a very quiet April and so was always likely. The more relevant benchmark is May 2010, where lending volumes were higher than May this year, reflecting the ongoing stasis within the property and mortgage markets.
"Like the economy, the mortgage market is flatlining, showing no real signs of energy or growth. The CML talks of a stable market, but stable is really a euphemism for flat.
"The extreme caution of borrowers is highlighted by the popularity of fixed rate mortgages despite the fact that rates are unlikely to rise any time soon.
"Many households are in a position such that they cannot even afford to gamble on rates. They have to play a conservative hand and opt for a fix.
"On a more positive note, we are seeing more products and better products come to market, but you still need a solid credit history and a decent deposit to secure them."
Paul Hunt, managing director of Phoebus Software said:
“Lending will need to continue to grow strongly in order to make up the annual falls currently in the figures, but there’s every chance it will do so. The jump in the number of loans in May could be the beginning of a sustained lending recovery as lenders’ confidence about the market continues to improve.
"With interest rates unlikely to pick up before 2012, lenders know that finance is currently highly affordable and the sharp rise in remortgages shows borrowers are keen to refinance now in order to secure cheap fixed rate deals for the next few years.
"There are also signs that lender liquidity is improving as repayments to the special liquidity scheme have reached £148bn of the £185bn owed. While there are still some potential storms on the horizon, the second half of this year could see lending rise significantly.”
