New figures from the Council of Mortgage Lenders (CML) estimates that total gross mortgage lending in July increased to £16.6 billion, a rise of 12% from £14.8 billion in June and 29% higher than the total of £12.9 billion in July last year.
This is the highest monthly estimate for gross lending since October 2008 when £18.6 billion was lent in mortgages.
CML market and data analyst Caroline Purdey said: "An improvement in sentiment and activity continues to show in the UK housing and mortgage markets, with a more positive picture also starting to emerge in the economy.
"Our forward estimate of gross mortgage lending in July reinforces a growing evidence base of a strengthening in the housing and mortgage markets."
Commenting on the figures David Newnes, director of LSL Property Services, said: "Life for mortgage borrowers is at its rosiest since the financial crisis. High LTV lending is at a five-year high, which has unlocked the first-time buyer market and starting to unleash a ripple of activity further up the housing market.
“Help to Buy and Funding for Lending have been key to the recovery. The schemes are encouraging lenders to roll out a wider and cheaper range of products as they try to compete for market share. Borrowers have more choice than at any point since 2008, and lenders are making it substantially easier to access high LTV loans. Cheaper mortgages have transformed buying conditions and opened up the market to a wider range of potential buyers."
Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), agreed that borrowers have an increasing amount of product choice at the moment.
“With over 10,000 products on offer for the first time since the financial crash, consumers were spoilt for choice in July,” he said, “Additional funding through government initiatives has caused lenders to compete for business in order to catch ambitious lending targets. Since the start of the Funding for Lending Scheme began rates have fallen by one percentage point across two, three and five-year fixes. The market is certainly ripe for picking, with the best choice of products and deals for years. Investing time to weigh up the options can really pay off in the long term”