The number of mortgage approvals jumped to a 17-month high during July as buyers continued to return to the property market.
A total of 38,181 home loans were approved, 77 per cent more than in July last year and the highest level since February, 2008, according to the British Bankers’ Association (BBA).
There was also a rise in total mortgage advances, with £8.4 billion lent during the month, up from £8.1 billion in June.
But despite the increase the BBA said the figures were below seasonal expectations.
It added that new lending was being offset by people reducing their mortgage debt, with net lending, which strips out redemptions and repayments, falling to £1.6 billion, its lowest level since October 2000.
The BBA said slower housing market activity meant it was taking longer for mortgage approvals for house purchase to work through into the gross and net lending figures.
It added that the number of people remortgaging continued to be subdued, with only 30,600 loans arranged by people switching to a better deal during the month.
But the group said the figure appeared to have stabilised and was slightly up on both the previous month and the recent six month average.
The number of people withdrawing equity from their home or taking out a mortgage on a buy-to-let property continued to fall in July to reach its lowest level since October, 1997, of 18,509.
David Dooks, director of statistics at the BBA, said: “The numbers of mortgages approved for house purchase each month by the high street banks have continued to recover from last November’s low point, but new lending is largely being offset by repayments, so that net rises remain relatively weak.
“Unsecured borrowing is subdued, with households focused on managing their personal finances and building up deposits.”
Credit card spending was unchanged from the previous month at £5.8 billion, while repayments were slightly higher at £6.2 billion, leading to outstanding plastic debt rising by £125 million once interest and charges are factored in.
Lending through loans and overdrafts remained weak, with people repaying £303 million more than they borrowed in July, the 12th consecutive month in which repayments have outstripped new lending. Consumers also continued to boost their savings levels, depositing £2.5 billion in July, the second highest figure this year, on a seasonally adjusted basis.
The rise in mortgage approvals for house purchase showed that the property market was continuing to stabilise as buyers returned, but economists expressed disappointment that the increase had not been greater.
Allan Monks, of JPMorgan Chase Bank, said: “The BBA reported a modest rise in mortgage loan approvals for new home purchase from 35,600 to 38,000 in July.
“This is the highest reading on approvals since February 2008, and extends the recent steady uptrend.
“But the gain was small relative to the surge in demand for new home purchases evident in the RICS survey, and therefore comes as a disappointment. Unsecured lending also continued its weak trend.”
Seema Shah, property economist at Capital Economics, said: “July’s modest rise in mortgage approvals provides further evidence that, while housing market activity is recovering, it is doing so at only a very gradual pace.
“With little tangible evidence that the tightening in lending criteria is being reversed, we do not expect the recovery to gather much momentum over the coming months.”