There were 62,932 mortgages approved in September, up from 60,984 in August, the latest figures from the Bank of England show.
However mortgage approvals are still below the rate seen before the European Union referendum in June.
The Bank’s figures also show that consumer credit continued to grow strongly in September. Credit card lending rose by £500m, taking the annual growth rate to 8.4% whilst other loans and advances to households rose £900m.
The figures follow on from those released earlier by the British Bankers’ Association which showed a pick-up in approvals in September to 38,252, up from 37,241 in August.
Andrew McPhillips, chief economist at Yorkshire Building Society, said: “The fact that lending has increased compared to the same month last year despite mortgage approvals falling is most likely a result of increasing house prices, which have caused people to take out larger loans to afford a property. Remortgaging is also accounting for an increasing proportion of market activity as people are looking to make the most of the record-low rates currently available, while house purchase activity is showing a decline as a result of both the lack of supply and increasing house prices which are limiting the number of people who are able to get onto the property ladder.
“The housing crisis is arguably one of the most significant issues facing the UK at present, and is producing an intergenerational divide in wealth. It is not only affecting first-time buyers, but also limiting the number of properties available to existing home owners, potentially leaving them in a home which no longer suits their needs. In order to subvert this trend, the UK needs to build more houses to ensure that enough properties are available to buy, and reduce the level of house price inflation.”
Richard Pike, Phoebus Software sales and marketing director, added: “The figures from the BoE today show that the mortgage market continues to buck the expected ‘post referendum’ trend . The effect of low interest rates appears to be having the desired effect when it comes to consumer confidence and spending. Unsurprisingly the remortgage market is bubbling along and in general keeping the market as a whole in a positive position. The increase in longer term fixes is telling in itself, perhaps the insecurity of what happens when Article 50 is implemented in 2017 is the driving factor here.
“The purchase market is more subdued which could be down to supply rather than appetite. It is well documented that demand continues to outweigh supply, which is a situation that has no quick fix. As we saw in the GDP figures last week, construction output is down, despite all efforts. We do need to be moving much faster to keep up with demand; the worrying question is do we actually have the capacity, skilled labour and materials to build the number of houses we need?
“Nonetheless, the likelihood is that we will continue to see modest growth, especially in this last quarter. As help-to-buy comes to a close those with smaller deposits will have to move fast to take advantage of the scheme, which could mean a surge in first-time-buyer activity.