GROSS mortgage lending slowed to £25bn in August, according to the latest monthly survey from the Council of Mortgage Lenders.

This was 13 per cent lower than in July and just three per cent higher than in August 2003. This is in contrast to last month, when lending was three per cent up on the previous month and 13 per cent up on the previous year.

Last month lending was driven by a new £14.6bn monthly record for house purchase loans, but house purchase lending in August fell back by 18 per cent to £11.9bn. This was the same as in August last year, and was the first time since August last year that lending for house purchase did not show a year-on-year increase.

The number of loans for house purchase fell by 20 per cent in August to 104,000, down from 130,000 in July and 116,000 in August last year. First-time buyers accounted for 28 per cent of these, the same proportion as last month. The typical first-time buyer borrowed 87 per cent of the value of their property.

CML director general Michael Coogan said: "This month's figures seem to suggest that the slowdown recorded by estate agents and reflected in recent approvals figures is beginning to make its way through the lending system. What does seem clear, taking all the market data together, is that the market is slowing down.

“While we need to remain alert to the possibility that there could be a bounce back next year if consumers become complacent about the future direction of interest rates, all the evidence so far points to the likelihood of an orderly soft landing, in line with our expectations."