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According to latest figures mortgage lending has supposidly returned to levels seen early last year.

The amount of mortgages approved  for house purchase increased to 31,162 in May, up 15.8% compared with the same month in 2008.

But the British Bankers’ Association information also showed that borrowing on credit cards has dropped due economic uncertainty.

Most lenders have raised the cost of fixed-rate mortgages in recent days due to swap rate increases by the banks

Despite mortgage approvals rising the BBA said that the mortgage market remained subdued.

Net new mortgage lending of £2.3bn in May, was again at its lowest level since March 2001, having fallen from £2.5bn in April.

BBA statistics director David Dooks argued that High Street banks were loosening their lending constraints and offering mortgages to people who did not have a large deposit to give.

But he said that consumers’ appetite to borrow had been hit by uncertainty over jobs, house prices and the state of the economy in general.

This also meant that demand for new loans was contracting, and spending on credit cards was down 11.4% on a year ago.

With interest rates still at a record low, the number of people remortgaging has continued to fall. Approvals were down 60% to 24,847 in May as many householders simply stuck with their lenders’ variable rates.

Low interest rates – with the Bank rate still at 0.5% – were also hitting savings, with the BBA seeing a low level of new deposits being made by customers, who are likely to be searching elsewhere for higher returns.