Mortgage lending approached the £10 billion mark in October, according to the British Bankers' Association (BBA) – 32% higher than October 2012 and the highest level in almost four years.
The number of house purchase approvals in October showed an increase of 33% on last year, while remortgage approvals showed an 18% increase.
The BBA attributed the strong year-on-year performance to the Funding for Lending and Help to Buy schemes, which have improved the availability and affordability of mortgages at all loan-to-value ranges.
However, on a month-to-month basis, the total number of mortgage approvals fell slightly from September, while net borrowing also fell.
House purchase approvals fell for the first time in seven months to 42,808, the BBA announced, defying economists’ expectations that they would rise to 45,000.
The fall in net borrowing reflected the new trend of homeowners overpaying on their mortgages, the BBA suggested, as consumers took advantage of lower interest rates to pay back £167 million more than they borrowed. (Read more about overpaying here.)
Howard Archer, the chief economist at HIS Global Insight, suggested that people may have started "easing back" on borrowing ahead of Christmas.
There are also suggestions that buyers might be waiting for other lenders to join the Help to Buy Scheme in January, which may deliver more competitive rates.
HSBC became the latest Help to Buy participant this week, offering rates that undercuts all its major rivals.
With Barclays and Virgin Money among those to follow in January, it may be hoped that the influx of competition will push rates lower in the new year.
Commercial Lending Falls
Lending to businesses also fell in October, raising concerns about the robustness of the recovery.
The news comes as Britain's state-supported banks face accusations of pushing solvent firms into default to profit from their assets.
Dr Archer described the commercial lending figures as "very disappointing".
"It remains to be seen if October's relapse in lending was at least partly a correction after the jump in lending in September," he said.
"But it is nevertheless a setback to hopes that banks are becoming more prepared to lend to businesses given the improved economic situation and outlook."
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