Mortgage lending hits new peak as homes shortage fuels boom

House prices look set for a summertime boom as new figures showed the shortage of homes for sale had hit a 23-year high while mortgage lending surged to a fresh peak.

Consumers borrowed a record £4.2bn last month ahead of a major house-buying spree over the coming months, the British Bankers Association said.

But potential buyers will find themselves chasing a dwindling number of properties, says a separate report showing the stock of homes on the market has dropped to its lowest level since 1979.

"The stage is set for further strength in the housing market," said Alan Castle, an economist at Lehman Brothers. "But the risks of a rapid correction look to have increased."

The Royal Institution of Chartered Surveyors said its members had an average of just 60 unsold properties on their books in April, the lowest number since August 1979.

Despite this, the number of transactions was still close to the 13-year high seen in March. The intense competition for the few available properties pushed prices to their highest level for almost three years, RICS said.

Ian Perry, its national housing spokesman, said: "There would appear to be no end in sight to the rise in prices."

Most surveyors reported rises of between 2 and 5 per cent over the latest three months. A sizeable minority reported price rises of 8 per cent. The difference between the number of surveyors reporting a rise in prices outnumbered those seeing falls by 63 per cent, the largest margin since the 64 per cent seen in November 1999.

Its price index is now close to its highest level since the end of 1988, when the market was nearing the peak of a boom that preceded a bust.

Demand for homes has been fuelled by mortgage rates close to a 50-year low, falling unemployment and rising wages. Investors have also been attracted away from falling stock markets into property.

A new survey from Investment Property Databank said buy-to-let investors made a profit of 17 per cent last year. This compared with a 13 per cent drop in stock market investments and a 1 per cent gain on bonds.