Demand for all forms of credit and personal loans are rising but housebuyers lead the way as recent cuts in interest rates and the arrival of Spring spurred a sharp rise in mortgage lending.

According to the Bank of England there were 101,000 mortgages approved in March, up by 12,000 on the figures for February and 10,000 more than one year ago.

On a seasonally adjusted basis total mortgage lending was £9.19bn, up from £7.8bn in February and £6.97bn in March last year.

Michael Coogan, director general of the Council of Mortgage Lenders, whose members include banks and building societies welcomed the figures.

"Lending figures in March were significantly up on previous months and reflect increased confidence in the market," he said.

"The reductions in interest rates along with the usual seasonal Spring effect have encouraged buyers back into the market."

Business borrowing weak

Individuals are borrowing - but companies are not

Separate figures from the British Bankers Association confimed that low interest rates and fading fear of recession had spurred general borrowing from individuals.

Taken together lending by banks to inviduals rose by £5.1bn in the first quarter, against a £4.9bn rise in the last quarter of 1998.

But because of the low level of credit to commerce and industry the underlying rise in total lending in the quarter was well down on the average rise of last year, which exceeded £10bn.

This suggests that the lending rise is not dramatic enough to have a major impact on the Bank of England's Monetary Policy Committee's interest rate deliberations this week.

Lending should not trouble the Bank of England

Tim Sweeney, director-general of the BBA said the lending figures were a move in the right direction.

"These longer-term figures show that recent rises in the major banks' lending are clearly concentrated in the personal sector," he said.

"This is not surprising, with historically low interest rates and the rising perception that the economy is heading for a soft landing, consumer confidence is improving and demand has definitely increased."

In good shape

Lending to commerce and industry rose by only £1.2bn, the smallest increase for five quarters, and reflected the widespread repayment of borrowing.

Mr Sweeney explained that repayments of borrowing by industry suggest company finances are in good shape, while the increase in borrowing by property and construction companies reflects continued optimism in these industries.

Jeremy Hawkins from the Bank of America said that the rise in consumer credit in March was a reflection of returning confidence.