Mortgage lending in jump of 16%

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 the Communities and Local Government Department 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.