Surge in mortgage lending

Mortgage lending has surged to record levels as homebuyers rush to take advantage of lower interest rates and the competitive home loan deals on the market.

An unprecedented £6.5bn worth of loans for house purchase were approved by the big British banks in March - 53% up on February's £4.2bn, it was disclosed yesterday. The number of remortgages -where borrowers move their home loan to another lender - was also "spectacularly high", said the British Bankers' Association.

The figures coincided with new data from Nationwide building society showing house prices rose 0.8% in April. But the society also disclosed that the annual rate of house price growth has fallen to its lowest level for more than four years, largely as a result of the slowdown which gripped the property market for much of last year.

The BBA said about 85,100 loans for house purchase were approved in March, compared with 56,900 in February, while the number of remortgages jumped 39% to 56,400.

Spring is traditionally the peak home-buying season but BBA director general Tim Sweeney said the new figures suggested levels of demand well in excess of the usual seasonal upturn.

"With falling interest rates and lower variable rate mortgages from banks, customers are now being presented with more attractive financing options and this must be driving activity in the mortgage market," he added.

The strong upswing in the mortgage market is expected to last for several months, particularly as the latest figures do not take into account April's base rate reduction, which will have further improved affordability.

Nationwide said the picture was upbeat, reporting that house prices rose in April for the third time in four months. The 0.8% rise translates into a £38 a day increase for the average homeowner and lifted the average price tag to £86,244.

A spokesman said the typical UK property now costs 6.6% more than a year ago - the lowest annual rate of price growth since August 1996 and down on this time last year, when house price inflation was running at 17.5%.