Lending to first-time buyers in the final quarter of 2013 was at its highest level since Q3 2007, the Bank of England has reported. The value of loans advanced to first time buyers increased by £3.1 billion over the past year to £10.6 billion, an increase of 41%.

Meanwhile, gross advances are at their highest level since 2008.

Interest rates on new lending, the number of new arrears cases and stocks of possession cases remaining unsold are at their lowest level since this series began in 2007.

There was an increase in the value of new lending for buy-to-let over the past year, up from £4.3 billion advanced in Q4 2012 to £6.6 billion in Q4 2013. This was the highest quarterly amount since Q2 2008.

In addition, the Bank said the proportion of gross advances at a high LTV (i.e. over 90%) was little changed at 2.1% in Q4 2013.

Jonathan Harris, director of mortgage broker Anderson Harris, said: “An increasing number of borrowers are worried about the threat of an interest rate rise, with more than 80% of mortgages taken out in Q4 2013 on a fixed-rate basis. However, another reason for the migration towards fixed rates is the fact that they are so cheap: they may have edged up slightly in the past few weeks but in Q4 2013 the average fixed rate fell to 3.25%.

“The proportion of lending to first-time buyers increased as borrowers took advantage of the early introduction of the second phase of Help to Buy, and lenders who are not participating in the scheme extended their range of high loan-to-value products. The value of loans advanced to first-time buyers hit the levels last seen in the third quarter of 2007, illustrating that this important sector of the market has well and truly returned.

“Buy-to-let lending also continued to pick up, as investors shunned poor rates on savings accounts, choosing instead to invest their money in property. With rental yields higher than savings rates, and lenders offering cheaper mortgages with looser criteria, it is no surprise that the buy-to-let sector continues to expand. Of course, this makes it harder for first-time buyers to get on the housing ladder as they are competing with landlords for property and in cities such as London there is limited supply in the first place.

‘The mortgage market has continued to perform well into this year, with plenty of competitively priced products available. However, the Mortgage Market Review will be introduced next month and there are fears that this will make it much harder to get a mortgage. While we believe there will be a slowdown as lenders ensure everything is functioning as it should be, many of them have already introduced the changes so it should largely be ‘business as usual’ for good quality borrowers who don’t have issues with their credit history. It will also provide a welcome boost for brokers who will be able to interpret the new rules and guide borrowers through them.”