The number of people remortgaging has been low
UK mortgage lending rose by 5% in October compared with the previous month, according to a lenders' group.
However, the £13.5bn of gross mortgage lending recorded by the Council of Mortgage Lenders (CML) was down 27% compared with a year ago.
The group said that the month-on-month rise in lending was typical seasonal activity.
But the type of lending has changed since the start of the year, with remortgaging at "decade-low levels".
'Reasons to be cheerful'
Lending and house prices rose over the summer and have remained relatively stable in recent months, although they had been at very low levels as a result of the credit crunch.
The Bank of England's own "Trends in Lending" report, also published on Thursday, reported that more mortgages were approved by major banks in October than in September.
"Recent weeks have provided some reasons to be more cheerful about the state of the UK economy and housing market. We are now likely out of recession," said CML economist Paul Samter.
However, any future rises in mortgage lending were likely to the result of seasonal factors rather than a fundamental shift in sentiment, he said. Generally, people are less likely to be buy a new home in the run-up to Christmas.
"We remain sceptical how much further housing and mortgage market activity can improve from current levels. As a result, we also expect only a modest improvement over the course of next year," Mr Samter said.
In the coming months, the year-on-year comparison of mortgage lending is set to show less dramatic declines as lending volumes dropped sharply in the latter part of 2008 and early 2009.
The CML did note a marked trend in the type of lending being offered. House buying activity has picked up significantly since the start of the year. In contrast, remortgaging has dropped to levels as low as any seen in the last 10 years.
House buying usually tails off at the end of the year
Borrowers had "little incentive" to remortgage when the current fixed-rate deal came to an end, the CML said, choosing instead to automatically pay the low standard variable rate with interest rates so low.
Others found themselves unable or unwilling to remortgage because their equity had shrunk owing to the sharp fall in house prices at the turn of the year.
Interest rates are expected to remain low in the coming months.
Both the Bank of England and the CML said that the number of people falling into arrears on their mortgage repayments was lower than expected - partly as a result of consistently low interest rates.
Last week, the CML revised its forecast for the number of homes that will be repossessed in 2009. If its prediction is accurate, this will see repossessions rising by just 8,000 compared with 2008, with 48,000 homes being repossessed.
A belief that house prices have no further to fall has prompted some house buying activity, according to Andrew Montlake, director of mortgage broker Coreco.
"There is clearly an appetite to buy before prices become further out of reach. The estate agents we deal with are reporting that there has not been the usual dip in demand at this time of the year, which is doubtless a reflection of this."
At the end of the year, the threshold for the 1% stamp duty to be paid will revert to £125,000 from the current temporary floor of £175,000.