The number of first-time buyers jumped by 36 per cent in March, according to figures out today from the Council of Mortgage Lenders (CML).

The strong rise is a further sign that life is returning to the housing market, although the CML said that the total number of first-time buyers was still historically very low and that lending limits are continuing to constrain potential borrowers.

The survey revealed that house price falls and low interest rates have brought the cost of owning a home to its lowest level since 2004 but the CML stressed that only those with equity or cash for a deposit can take advantage.

Despite the increase in March, compared with February, the total number of first-time buyers remained low, at 12,500, 30 per cent fewer than in the same month last year.

High demand for property bargains means that borrowers seeking new money, rather than refinancing existing deals, now account for 35 per cent of all mortgage lending, up from 31 per cent in February and the highest percentage since December 2007.

However, the CML said that the number of homeowners remortgaging remained low, because many are already on attractive rates and because falling house prices have meant that those without much equity are ineligible for good deals.

Bob Panell, head of research for the CML, said: "Because the flow of lending is still constrained, there is a sharp dividing line in the housing and mortgage markets between those who can raise a substantial deposit and those who can't.

“For those who can, the burden of debt payments is low and mortgage interest is consuming proportionately less income than for a number of years. But for those without substantial deposits, entering the market is still both difficult and uncertain. While there are some signs of demand increasing, house prices remain weak and lending criteria inevitably remain inherently conservative as lenders necessarily seek to rebuild their capital position."

First-time buyers borrowed on average three times their income, putting down a typical deposit of 25 per cent - equivalent to around £30,000 on the average cost of a home and still not enough to apply for the very best mortgage rates on the market.

However, those who make it on to the ladder are enjoying interest payments of 15.1 per cent of their income - the lowest proportion since June 2004.

The CML said there were 18,900 home movers worth £18.9 billion, up 27 per cent from £14.9 billion in February but still 34 per cent down on March 2008.

The average home mover loan was £115,000 compared with £135,000 in March 2008, with interest absorbing 11.4 per cent of income - the lowest proportion since January 2004.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "While housing market activity has passed its low point, ongoing very poor economic fundamentals and still tight credit conditions suggest that the improvement in activity will be relatively gradual and fitful for some time to come. Consequently, house prices look likely to fall significantly further, although we do expect the rate of decline to progressively moderate."

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