Gross mortgage lending in the UK rose 2% from August to £12.5bn (US$20.5bn) in September, according to the Council of Mortgage Lenders (CML), a trade association for the UK mortgage lending industry. September's lending figures bring the third-quarter gross total to £38.9bn, an 18% increase from the second quarter although the figure is 36% below the same time last year. “House buying activity is running at considerably higher levels than around the turn of the year," said CML economist Paul Samter in market commentary Tuesday. "However, it remains weak on any historic comparison and is unlikely to rise much further given the constraints the lending community faces and a still difficult economic backdrop." The Financial Services Authority (FSA) on Monday proposed significant changes to the types of mortgage products sold in the UK and the way UK mortgage lenders conduct business in a housing market that shows signs of recovery as average prices increase. UK mortgage lending tends to be more conservative compared with recent lending practices in the US -- including the UK's historic requirement of at least 20% down for purchases. These comparatively conservative practices tend to provide more adequate support for securitization of loans within residential mortgage-backed securities (RMBS). Unlike US conservatorship of mortgage investor and securitizer giants Fannie Mae (FNM) and Freddie Mac (FRE) currently and the significant presence of Federal Housing Administration (FHA)-insured loans in the market, UK loans do not carry government guarantees. Securitization, therefore, bears much less government involvement and is generally seen in a more positive light. And while the UK's share of mortgage stress paints an "overwhelmingly negative" view of securitization among some structured finance investors, US servicers indicate the situation for securitized loans might be better than investors think, according to a report Tuesday by Standard & Poor's Ratings Services (S&P). "At an October conference, a panel of UK servicers for loans securitized in commercial mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS) transactions suggested that their situation is not as bleak as some investors might think," said Beverley Dunne, head of European servicer evaluations. Dunne added: "The panel at our Investor Hot Topic event cited as an example that some loans are actually benefiting from an upturn in property prices, although this is highly dependent on the type and quality of the property." Residential servicers are taking advantage of a shortage of available housing inventory by picking up the turnover rate at which a servicer resells a foreclosed home. Commercial servicers are having a harder time of securing finance on poorer quality stock with short leases and vacancy issues, according to S&P's panel. Although the commercial real estate sector remains mixed, British Land recently closed a £40.25m deal to purchase a 76,000 square-foot office building in London's West End. The offices -- located in central London near the performing arts district known as "Theatreland" -- are currently leased to Bank of America until July 2012. Opportunities to re-let the offices in 2013 after refurbishment look promising, as property will likely be even more scarce at that time. "The lease expiry sits comfortably in our portfolio which benefits from long and strong income," said Tim Roberts, head of offices with British Land. "We plan to refurbish, but also we have the option to work with the existing strong line up of occupiers to renew their leases." Write to Diana Golobay.