The index by Mortgage Advice Bureau and Coreco Group revealed that house purchase applications were 20% up in March on the same period of last year.

In addition, while demand for remortgage deals abated in March after a surge in February, application numbers were 31.9% higher than March 2010.

The brokers noted that, while remortgage transactions for March were at their highest level in any one month since April 2008, figures appear to have reached a plateau.

Fixed rate deals continued to be the overwhelming product of choice for purchase and remortgage clients in March, chosen by 80% and 73% respectively.

Meanwhile, the average loan size for house purchase increased in March to £127,546 from £123,508 the previous month, compared to a 7.1% in loan size for remortgage applications. It fell from £142,466 to £132,341.

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The average LTV for house purchase also dropped slightly to 69.9% in March compared to 71.4% in February, while the average age of a mortgage applicant was 37 years 7 months.

Regionally, the South West saw the largest rise in applications, up 30% on the previous month, while the North West recorded a 6.3% drop in house purchase applications.

Excluding London, the average loan size was highest in the South East at £155,895 and lowest in the North at £96,438.

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “March figures are encouraging and continue the positive start to the year with another month-on-month increase in borrower activity. This reinforces the belief that a more stable market is slowly returning.”

He added: “Although remortgages are still significantly up on 12 months ago, with transaction levels in March at their highest level in any one month since April 2008, numbers do appear to have reached a plateau. We may well see remortgage transactions dropping off further in April with inflationary pressures easing, making it less likely that we will see a rate rise before the summer.”

Murphy noted that mortgage product availability and competition among lenders continues to improve, with the number of higher LTVs on the rise.

He said: “Following a slight rise in the cost of the average two- and five-year fixed rates during March, pricing has fallen back marginally this month, although conversely average two-year tracker rates have ticked back up a little.

“Importantly, average rates for two-year trackers and two- and five-year fixed rates are below the corresponding average rates that were being offered 12 months ago, further demonstrating that mortgage product pricing continues to offer good value relative to historic levels.”