Mortgage lending rose by 4% in September compared with the same month last year, but lenders have warned that confidence in the housing market is likely to fall in the coming months.
The Council of Mortgage Lenders (CML) said that gross mortgage lending totalled around £12.9 billion last month. The figure was down 2% on the £13.1 billion lent in August this year, when mortgage lending hit a two-year high.
CML chief economist Bob Pannell predicted that CPI inflation - which hit a three-year high of 5.2% in September - and unemployment fears would reduce market confidence.
He said: "Both house purchase and remortgage lending appear to have fared well in September, but this is against the backdrop of subdued levels of activity.
"However, short-term economic prospects for the UK are not favourable. The housing market is very sensitive to wider household confidence, and this seems likely to weaken over the coming months in response to the latest spike in consumer prices and headline unemployment figures."
Lending for the third quarter of 2011 was an estimated £38.6 billion, up 15% on the second quarter of this year, when £33.5 billion was lent. The latest quarter also represents a 2% increase on the same period last year, when £37.9 billion was lent in the third quarter of 2010.
The CML's members are banks, building societies and other lenders who undertake around 94% of all UK residential mortgage lending.
The figures were released on the same day that housing minister Grant Shapps called for lenders to consider offering fixed mortgages of up to 30 years to encourage greater market stability.
Mr Shapps wants to spark a national debate on longer-term fixed mortgages as a "normal and sensible choice".
David Whittaker, managing director of Mortgages For Business, said of the latest figures: "The cocktail of record low interest rates and record high inflation has made the prospect of saving for a deposit as realistic as finding a pot of gold at the end of a rainbow."