The Council of Mortgage Lenders said that gross lending, a figure which excludes redemptions, rose to £20.1 billion in March from £17.8 billion in February.

The increase reflected a 20 per cent rise to 22,000 in the number of loans granted to first-time buyers, whose absence has been viewed as key to the property market slowdown.

However, the council dashed hopes that the lending rebound, which followed a seasonal pattern, heralded a surge in mortgage demand.

"The market remains on course for the ‘steady as she goes’ scenario that we envisaged at the beginning of the year," Michael Coogan, the CML director general, said.

Year on year, lending fell by 19 per cent in March. The first three months of 2005 had been the worst quarter for home purchase mortgages for six years.

He also warned homeowners to brace for a rise in borrowing costs, the chances of which were increased yesterday by data showing the strongest inflation in seven years.

"As there is a risk of an early interest rate rise, householders should consider what steps they can take to ensure that they can continue to meet their mortgage commitments," Mr Coogan said.

The CML’s finding were echoed in data from the British Bankers’ Association which showed net mortgage lending, a figure including redemptions, rising at £4.5 billion, near its six month average.

David Dooks, the BBA’s director of statistics, said: "The market clearly has some inherent strength which is underpinning demand."

However, the report also noted declining growth in consumer lending, with credit card borrowing "very weak".

"The expected stimulus to consumer credit of Easter falling in March was not evident," Mr Dooks said.

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