Mortgage lending by the major banks rose by 46 per cent in August following a dip during the previous month, figures showed today.
Net lending, which strips out redemptions and repayments, reached £2.8 billion last month, recovering from just £1.9 billion in July, according to the British Bankers' Association.
The figure was slightly above the recent six-month average of £2.7 billion and 17 per cent higher than in August last year, as demand continued to be boosted by the recovery in the housing.
The number of mortgages approved for people buying a house was marginally down compared with the previous month at 38,095, reflecting the seasonal slowdown in housing market activity during August.
Demand for mortgages for house purchase has recovered steadily during the past year, with the number of mortgages approved for house purchase last month 81% higher than in August last year, and more than double the low of 18,330 reached in November 2008.
But the number of people remortgaging remained subdued at just 26,124, while those releasing equity from their property or taking out a buy-to-let loan hit a new record low of 17,918.
David Dooks, BBA statistics director, said: "The main high street banks' mortgage lending has stabilised in a market where other lenders are largely inactive.
"Loans approved for house purchase have recovered to early-2008 levels, but low levels of customer demand and a limited number of properties coming on to the market will continue to moderate lending."
Consumers continued to respond to the recession by reducing their levels of unsecured debt and increasing their savings.
Credit card spending was slightly down on the previous month at £5.6 billion, with repayments continuing to outstrip new usage at £5.8 billion.
Once interest and charges were factored in, outstanding plastic debt rose by £203 million, but people repaid £183 million more on loans and overdrafts than they borrowed during the month.
Consumers have now reduced outstanding personal loan debt by £1.9 billion since the beginning of the year.
Savings levels also jumped by £3.3 billion during August, more than double the recent six-month average, as people focused on bolstering their financial position.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "The BBA data indicate that mortgage activity is currently stabilising at a level significantly above its November 2008 record low levels, but still well down on long-term norms.
"While housing market activity has been lifted by the still significant fall in house prices from their 2007 peak levels and low mortgage interest rates, the upside continues to be limited by unfavourable economic fundamentals and tight credit conditions."
Brigid O'Leary, senior economist at the Royal Institution of Chartered Surveyors, said: "This morning's data from the BBA highlights that the continued news of increasing buyer interest is not readily translating into higher levels of mortgage approvals.
"Lending for new house purchase was virtually unchanged in both value and volume terms between July and August.
"This is probably a sign that banks are still either not willing or not able to extend their mortgage lending facilities, but it could also be an indication that low levels of property for sale are constraining any increase in potential transactions and, therefore, mortgage approvals."