Estimated gross mortgage lending for the total market in May was £22.2bn, 8.8% higher year-on-year, UK Finance figures showed.
Mortgage approvals by the main high street banks in May have also risen, increasing by 3% compared to the same month a year earlier.
As in April, increased approval numbers were driven by remortgaging, some 18% more than a year earlier while approvals for house purchase were 3.8% lower year-on-year.
John Phillips, group operations director at Spicehaart, said: “This spike in remortgaging is most likely due to short-term deals coming to an end and homeowners looking to lock in low rate fixed deals amidst ongoing speculation that rates will go up later in the year.
“For house purchase to really pick up, the government needs to think about making some real changes. First-time buyers have seen some good initiatives – stamp duty cuts and help to buy – but they are obviously not enough to really get things moving.
“Data released yesterday by Hamptons International revealed that it now takes an average of 10 and a half years for first-time buyers to raise a 15% deposit, rising to 17 years for a single Londoner.
“This is crazy – it shouldn’t be that difficult for people to purchase their first home and more needs to be done to help. Ideally, I would like to see stamp duty cut altogether, for everyone, because it is really stifling the market.”
Eric Leenders, managing director, personal finance at UK Finance, added: “May’s increase in mortgage approvals was driven by strong growth in remortgaging, as a large number of fixed-term mortgages came to an end and homeowners took advantage of a competitive market to shop around for attractive deals.
“Increased efforts by lenders to contact their customers before their current mortgage deal expires have also contributed to this rise.
“The overall economic picture remains mixed, as household incomes continue to be squeezed. This may explain the growth of deposits held in instant access accounts, with consumers increasingly choosing to keep their money close to hand.”
Mark Pilling, managing director at Spicerhaart corporate sales, citing credit card spending rising by 2.3% year-on-year, warned how it can affect other areas of spending.
He said: “If credit card debt does continue to rise, we need to be prepared for the knock on affect this may have on other areas, such as people’s ability to keep up with rent and mortgage repayments.
“Lenders need to be keeping a close eye on their clients’ ability to keep up their repayments and engage with third parties to look after every borrower’s best interests.”
John Goodall, chief executive of buy-to-let specialist lender, Landbay, said: “Mortgage lending remained resilient in May, buoyed by the affordable borrower rates that are currently on offer.
“First-time buyers and those remortgaging underpin much of this growth as they continue to take advantage of attractive deals amid speculation of a base rate rise.
“With inflation nearing the Bank’s 2% target, and wages falling, a rate rise has been put on hold until at least August for now.
“However, the Bank of England’s Term Funding Scheme coming to an end marks the inevitable rise in the cost of funding, so we might see mortgage rates rise in the coming months regardless of an interest rate rise. Until this happens, lending levels should continue to hold steady.”