Loans for house purchase at highest for nearly two years

However, this pattern of increase is not repeated with loans for remortgaging which have stayed static for two months at 33,000. Apart from a total of 30,000 in August 2009, remortgaging is at its lowest level since this run of data began in 2002.

Fixed mortgages are continuing their downward trend from a high in July, when 80% of all new loans taken out were fixed. In October, this had decreased by 14% to 66%. Tracker mortgages, however, are on the rise with 21% of all new loans being trackers, compared to July’s low of 12%.

Borrowers are turning to trackers mainly because they now have greater expectation that interest rates will stay at, or near, their current low for a while to come. That, coupled with lenders pricing their trackers at lower rates than their fixes, makes trackers very appealing to those able to meet the criteria necessary to take advantage of them.

CML director general Michael Coogan said: "We are still in a two-speed mortgage market. It appears that low interest rates for those with substantial deposits, coupled with this year’s sustained increases in house prices, are encouraging more people to buy or move home.

"But the same low interest rates that are driving house purchase activity provide little incentive for borrowers to refinance their loans. This, coupled with ongoing tightness in lending criteria, continues to hold back the remortgage market."

Reponding to the CML figures, David Brown, commercial director of LSL Property services, said: "It’s still too soon to start opening the bubbly, but the lending market is clearly ending 2009 on a much more positive note than 2008.

"With the number of loans for house purchase up nearly 10% on October and over a third compared to the year before, the lending market has taken another big step along the road of recovery.

"We’ve seen the impact of gradual improvement in confidence in the housing market as the year has gone on – loans for house purchase are over double their January levels. Lenders just need to keep offering more affordable products to first-time buyers and property investors to keep up the progress into the New Year."

Jonathan Moore, director of www.easyroommate.com, said: "First-time buyers are finally starting to get hold of the mortgage finance they need to get on the property ladder – a third more have secured loans than this time last year.

"That’s great news for them, but it’s also great news for anyone looking for a room or flat to rent – anyone who doesn’t want, or can’t afford, to take the plunge and buy property yet. With fewer potential tenants trying to rent properties, there will be less competition for the best accommodation as buyers move out of the private rented sector. This should make it much easier for people to barter down rents when they’re negotiating with letting agents."

Have your say on this story using the comment section below