There was tentative evidence that a multibillion-pound scheme designed to unclog the flow of credit to Britain's homebuyers was starting to have an impact today as official figures showed a spike in mortgage approvals.
The £80 billion Funding for Lending Scheme (FLS), launched by the Bank of England and the Treasury at the start of August, makes money available to banks on the condition they pass it on to businesses and households in the form of cheaper loans and mortgages.
The number of loans approved for house purchase rose by 2,103 to 50,024 in September, while the number of loans approved for remortgaging increased by 1,860 to 28,343, the Bank of England said today.
Meanwhile, unsecured consumer credit rose £1.2 billion in September, the sharpest rise since February 2008, including an increase of £307 million in credit card borrowing.
Nida Ali, economic adviser to the Ernst & Young ITEM Club, said: "September's increase in mortgage approvals is encouraging, and suggests that the Bank of England's Funding for Lending Scheme may be beginning to have some impact."
The figures come after the ITEM Club warned corporate lending will drop to its lowest level since 2006 this year despite state efforts to lower funding costs, such as the FLS.
Borrowers have faced a tougher time trying to take out a mortgage in recent months as lenders have tightened their borrowing criteria, causing a drop in the proportion of mortgages approved.
Bank of England Governor Sir Mervyn King last week said more than 20 banking groups, including the five largest lenders in the UK, have signed up to the FLS, while funding costs have fallen by around one percentage point.
However, the Governor warned the initiative was temporary and lenders would have to accept further losses and writedowns if normal banking services are ever to return.
Vicky Redwood, chief UK economist at Capital Economics, said: "The reductions in borrowing rates have primarily been aimed at households taking out mortgages with low loan to value mortgages. So they may not help first-time buyers much.
"In any case, the Bank of England has warned that it could take several months for banks to review their lending plans in the wake of the scheme."