There was a 16% jump in mortgage lending to people buying a new home during April, further adding to evidence that the housing market is beginning to stabilise, figures showed today.
A total of 35,600 loans were advanced to people for house purchase during the month, the highest level since October last year, according to the Council of Mortgage Lenders.
The upturn builds on a recent run on positive data on the housing market, as buyers are tempted back by record low interest rates and recent house price falls.
But the CML cautioned that despite the recent pick up, the number of mortgages for house purchase were still 28% lower than they had been 12 months earlier, while they were well down on the average of 88,000 loans advanced for people buying a home in April during the past seven years.
Bob Pannell, CML head of research, said: "There are tentative signs of house purchase lending stabilising, but we need to see considerably higher transaction levels to underpin house prices."
In a further positive sign, the number of first-time buyers taking out a mortgage increased for the third month in a row to 13,500, the highest level since October last year, when the credit crunch intensified following the collapse of US investment bank Lehman Brothers.
First-time buyers continued to put down an average deposit of 25%, while they borrowed 2.96 times their income, down slightly from 2.99 times in March.
The CML said the slowdown in the rate at which these measures are worsening, combined with the recent launch of a number of mortgages for people with smaller deposits, may indicate that lenders are beginning to loosen their criteria.
The figures come just days after Communities and Local Government said house prices rose by 1.1% in April, while the Royal Institution of Chartered Surveyors said inquiries from new buyers increased for the seventh month in a row during May to reach their highest level since August 1999.
Both Nationwide and Halifax also recently report price rises during May of 1.2% and 2.6% respectively.
But despite the increasingly positive signs, economists are continuing to warn that house prices are likely to still have further to fall due to the current economic downturn and the ongoing problems in the mortgage market.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "The CML mortgage data add to the mounting and now widespread evidence that house price activity is picking up in response to the substantial fall in house prices from their 2007 peak levels and markedly reduced mortgage rates.
"Nevertheless, this has to be put into perspective. Housing market activity is still very low by long-term norms.
"Indeed, despite the recent pick up, mortgage activity is still down at a level that is normally associated with falling house prices."
He said IHS Global Insight still expected house prices to fall by a further 10% between now and the middle of 2010, although he added that this forecast could turn out to be too pessimistic if the economy sustains its recent improvement.
The number of people remortgaging continued to decline during April, dropping by 22% compared with the previous month to 31,000.
The remortgage market has been stifled by a combination of lower reversion rates for people coming to the end of a deal, and the high equity stakes being demanded by lenders in order for people to qualify for their best rates, which is making it difficult for some homeowners to switch loans.
The steep fall in remortgaging helped drive down the total value of all mortgage advances to £10.5 billion, compared with £11.5 billion in March.
The take-up of fixed rate mortgages continued to increase as borrowers hoped to lock in at a low rate before interest rates start to rise again.
Around 69% of all borrowers took out a fixed rate deal during April, the highest level since June 2008.
First-time buyers now typically spend 15% of their pay on mortgage interest, the lowest proportion since May 2004, while homemovers spend 11.3% of their income on it, a level last seen in November 2003.