Lending to first time buyers rose dramatically in October, according to the Council of Mortgage Lenders.
First time buyers advanced 26,800 loans in October, the largest number of loans in a monthly period since November 2007.
Strong buyer interest is strengthening activity in the housing market but limited supply remains a major problem.
House prices are set rise in the coming months with IHS Global Insight speculating that prices could increase by as much as eight per cent.
Howard Archer of IHS Global Insight commented:
While the strength of house price rises in London is a significant concern and pushing up the overall national increase in house prices, we are currently some way off from an overall housing market bubble emerging.
Even so the RICS October survey indicated that house prices are now rising in every region and there is a very real danger that house prices could really take off over the coming months, especially if already significantly improving housing market activity and rising buyer interest is lifted appreciably further by the “Help to Buy” mortgage guarantee scheme which was launched in October.
In the wake of rapidly rising prices the Bank of England's decision to end the Funding for Lending Scheme (FLS) mortgage incentives appears prudent. However, prices will most likely continue rise and the end of the FLS will have little impact.
This week Mark Carney indicated that the Bank is prepared to step in if the housing market gets out of control:
There is a history of things shifting in the UK and the housing market from stall speed to warp speed with underwriting standards slipping. So we want to avoid that.
The CML data showed lending booming not only for first time buyers but homeowners as well.
The total number of loans advanced to homeowners for house purchases bounced back from September's decline with a volume increase of 17 per cent in October. Loans for homeowners increased 24 per cent year-on-year.
Loans advanced to home movers rose by 19 per cent compared to September and were up 16 per cent compared to October last year.
Total buy-to-let loans advanced increased in October, up to 16,200 loans compared to 14,600 loans in September.