The Bank also announced that mortgage approvals have reached a five-and-a-half year high. In October, 67.701 mortgages worth £10.5 billion were approved for buying a house, the highest total since February 2008.
The latest figures come on the same day that Nationwide announced house prices went up by 0.6 per cent in November, taking the annual rise in its house price index to 6.5 per cent, up from 5.8 per cent in October.
Meanwhile, the Land Registry reported that annual house prices went up by 3.4 per cent in the last 12 months. Land Registry figures are based on actual sales, instead of mortgage approvals, which are used by Nationwide.
The Office for National Statistics puts annual house price inflation at 3.8 per cent.
The Bank of England also announced that total household debt in the UK has increased to reach a record high of £1.43 trillion.
The Bank said personal debt has risen gradually since the financial crash of 2008 after a sharp fall immediately after the crash and is now higher than the previous peak in 2008.
As the economy has improved, so has household confidence in taking out more mortgages, loans, overdrafts and credit cards.
The total UK household debt now stands at £1,429,624,000,000, up £29 million on the previous peak of £1,429,595,000,000 seen in September 2008.
This means that on average each UK adult owes £28,489, including home loans.
Immediately after the crash households looked to repair their own personal balance sheets and pay off debts. This trend has gradually receded and with the economy now showing sustained signs of recovery, households are prepared to borrow more.
The Bank of England said that the latest figures show £1.27 trillion is owed in mortgages and £158 million in consumer credit.
However, there was a drop in lending to businesses which fell by £1.1 billion following a rare increase in September when it went up by £714 million.
The strong mortgage approval figures are part of the reason for the Bank’s surprise announcement that it is to stop offering mortgage loans through the Funding for Lending Scheme (FLS).
Mr Carney said this decision had been made to ensure the housing market did not overheat.
The FLS helped to spark a mortgage price war with rates falling across most parts of the market and the number of mortgages available rising by 40 per cent.
Mr Carney said the FLS had completed the job it was set up to do in terms of increasing lending for mortgages and will focus solely on lending to businesses from January 2014.
Dr Howard Archer, Chief UK Economist at IHS Global said: “October’s relapse in lending is a setback to hopes that banks are now becoming more prepared to lend to businesses amid the improved economic situation and outlook. It also raises questions as to whether the extension to the Funding for Lending Scheme (FLS) in April to favour lending to smaller and medium-sized businesses is having much impact.”
Another government scheme, Help to Buy is expected to lead to mortgage lending continuing to increase. The second stage of the Help to Buy scheme was launched three months earlier than anticipated in October and offers government-backed equity loans to help people with small deposits of just five per cent get a mortgage.
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