There was a sharp rise in mortgages for home loans in March according to the latest data from the Council of Mortgage Lenders (CML).

The CML said mortgage lenders made 18,900 loans in the month worth £18.9 billion, up from £14.9 billion in February – a month-on-month increase of 27 per cent. But this was still 34 per cent down on figures for March 2008.

The average home mover loan was £115,000, compared with £135,000 in March 2008. Meanwhile, interest payments typically consumed 11.4 per cent of a home mover’s income, the lowest proportion since January 2004.

House purchase lending accounted for 35 per cent of all mortgage lending in March, up from 31 per cent in February and the highest proportion since December 2007.

While the figures mirror those released by the Bank of England and showed some signs of positive progress the CML urged caution saying that borrowers still needed very large deposits – typically 75 per cent – to be able to buy a property while mortgage lending was still constrained.

Both first-time buyers and existing homeowners were however benefitting from the lowest debt costs in years as low interest rates kept the cost of servicing mortgage debts down.

There was also an increase in the number of first-time buyers entering the market accounting for 40 per cent of loans, up from 38 per cent the previous month and traditional lows in recent years of 34 per cent.

In fact the proportion of first-time buyers was at its highest since April 2005, although the absolute number of first-time buyers remains low – 12,500, up from 9,200 in February but well below the 17,800 recorded in March 2008.

CML head of research Bob Pannell said there was still a sharp dividing line in the housing and mortgage markets between those who could raise a substantial deposit and those who couldn’t.

“For those who can, the burden of debt payments is low and mortgage interest is consuming proportionately less income than for a number of years. This is good news for now. Even so, a mortgage is a long term commitment. People borrowing now should be mindful of the years ahead when interest rates eventually rise, as they will,” he said.

Mr Parnell added that for those without substantial deposits, entering the market was still both difficult and uncertain and while there were some signs of demand increasing, house prices remained weak and lending criteria inevitably remained conservative as lenders sought to rebuild their capital position.

The figures follow yesterday’s May inflation report from the Bank of England in which the Bank’s governor Mervyn King warned that the UK economy faced a long and sustained period of healing and that in real terms economic recovery could begin at any time between mid 2010 and 2012.