Figures from the Council of Mortgage Lenders, published today show lending up 7% from the month before, but is still 44% lower than the same time last year.
Gross mortgage lending totalled £18.7 billion in October, up from September's £17.5 billion but well below the £33.4 billion lent in October 2007.
'While lending in October picked up from a low figure in the preceding month, the outlook is one of continuing weakness for housing and mortgage markets in the coming months, despite the Bank of England rate cuts in October and November,' said CML director general Michael Coogan.
'Consumer confidence is now being affected by the worsening economic outlook. However, any recovery in lending is also being held back by the continuing shortage of mortgage funding,' he added.
The CML, which represents banks, building societies and other lenders who undertake around 98% of all residential mortgages in the UK, called for the government to address the situation in next weeks pre-budget report and take concrete steps to encourage lenders to increase mortgage loans.
There is not much hope that the slight rise will have any effect. 'The bounce in mortgage lending in October is broadly consistent with the pick-up in new enquiries signalled by our latest housing market survey. Lower prices may be attracting some opportunistic buyers of property while the stamp duty holiday could also be encouraging new entrants,' said Simon Rubinsohn, Royal Institute of Chartered Surveyors chief economist.
'However with unemployment set to rise sharply over the coming months, this modest improvement in turnover is unlikely to run very much further. Significantly, with a meaningful overhang of stock already in place and more distressed sales likely, prices are set to fall some way further,' he added.
Tomorrow the CML will publish data on mortgage arrears and possessions. They are expected to show and increase in distress sales.
