Thursday 31 March 2016 4:30 pm

The mortgage market is helping to fuel a new credit boom

Lending in the UK is recovering strongly. The annual growth rate of total lending hit 4.8 per cent in February, according to figures released by the Bank of England this morning. It is the highest growth rate since 2009 when lending was plummeting.

Here's what is helping to drive it:

Mortgage lending

Borrowing is bouncing back in a number of areas. There were 127,134 mortgage approvals in February, up 22 per cent on last year. This equated to £21bn of mortgage lending, up 28 per cent. The mortgage market cooled down after the mortgage market review in 2014 which imposed borrowing restrictions on owner-occupiers.

However, the Bank of England this week inherited measures to clamp down on buy-to-let lending.

"The start of the year has seen a sustained momentum in house purchase lending, fuelled by the force of buy-to-let lending. February in particular saw a surge of buy-to-let activity as a result of the race to beat stamp duty changes – coming into force tomorrow," said Richard Sexton, director of chartered surveyor e.surv.

“Many fear this driver for lending activity may die down after April and some fall away appears likely. However, while buy-to-let may be the taking a lead role in the lending market at the moment, small-deposit borrowing and remortgaging are also reaping the rewards of a warm economic climate."

Consumer credit

Consumer credit – which mostly comprises of overdrafts and credit card borrowing – climbed 9.3 per cent. While growth in credit card borrowing is growing quickly, it is slow compared with other loans and advances which is mostly overdrafts.

Business lending

Lending to non-financial businesses also surged, rising 1.4 per cent. That may not sound like much, but its the highest annual growth rate since 2012 when it was contracting at a rate in excess of five per cent. Small- and medium-sized enterprises also borrowed more.

The very volatile lending to so-called non-intermediate other financial corporations rose 19.4 per cent year-on-year. This includes insurance companies, pension funds and securities dealers.