Gross lending for this year may fall slightly below the Council of Mortgage Lenders’ prediction of £140bn, says the Association of Mortgage Intermediaries (AMI) in its latest Quarterly Economic Bulletin.

The report states that significant risk remains on balance sheets as over a third of lending at Lloyds, Santander and RBS is at a high or very high loan-to-value.

It points to a continuing fall in house prices in most parts of the UK outside of London and that renting is more expensive than buying in eight out of ten British cities. The gap is as much as 30% in cities like York, Birmingham and Milton Keynes.

Robert Sinclair, director of AMI, said: “The squeeze on household incomes is depressing demand despite the fact it is now clearly cheaper to buy than rent in most parts of the UK.

“With interest rate rises off the agenda for some time, borrowers have little to fear in the short term from rising mortgage costs. Each quarter, we push back later and later our expectations for rate rises. Swap rates suggest February 2012 is when the Bank will increase them, but we think it could be even later than that now.

“Figures from the Bank of England’s Financial Stability Review also show there are still significant risks on bank balance sheets, with some demonstrating substantial exposure to high and very high LTV secured debt. Dealing with this level of exposure will make it more difficult for them to expand their balance sheets and comes at a time when they are under political pressure to lend more.”