Home loan lending at highest level since 2002

The housing market continued to defy expectations of a slowdown today as approvals for house purchase hit their highest level for nearly two years.

According to figures from the British Bankers' Association (BBA), just under 97,900 loans for new homes were approved during March - the highest figure seen since May 2002. At the same time the average amount homebuyers were borrowing jumped to ?109,200, up from ?103,400 in February, taking the total value of the approved loans to a record ?10.68bn.

The figures came as Nationwide building society reported that UK house prices rose by 2.1% during April (the equivalent of more than ?100 a day) to take the average cost of a home to ?145,918.

While the number of mortgages approved for house purchase were 34% higher than they had been in March last year, the number of people remortgaging was 2% lower, and the level of equity release loans dropped by 3%.

Total mortgage advances reached ?15.86bn during March, 17% higher than February's figure, but still below the levels reached last year. Net lending, which strips out redemptions and repayments, hit ?5.96bn, up from an average of ?5.5bn during the past six months.

"March saw mortgage demand step up a gear in line with the usual seasonal pattern," said David Dooks, BBA director of statistics. "As we expected from the number of loan approvals in February, new mortgage lending is returning to the levels seen in the second half of last year, and looks likely to remain buoyant in the near term."

Unsecured lending also raced ahead during March, with consumers spending a record ?8.32bn on their credit cards. Repayments were also strong, but even after these had been taken into account, outstanding plastic debt was seen to rise by ?484m - the highest figure since May last year - to leave consumers collectively owing ?29.93bn on their credit cards.

People also borrowed a total of ?3.6bn through personal loans and overdrafts during March, which fell to ?911m after repayments were taken into account, well up on the six-month average of ?600m.

Despite the lenders' enthusiasm, the mortgage figures were not greeted with approval from all quarters. Liberal Democrat treasury spokesman Vince Cable warned of the potential dangers of such rapid rises. "Large numbers of people are gambling on the house price boom - a gamble they may regret if house prices start to fall or interest rates rise," he said. "It is time for the government to take action to protect ordinary homeowners against irresponsible lending."

Evidence that neither the boom the property market or consumer credit are slowing down is also likely to cause concern for the Bank of England's monetary policy committee when it meets next week. The committee is expected to raise interest rates by 0.25% to 4.25% after keeping them on hold last month.