Mortgage lending has increased by an estimated £2 billion to £143 billion during 2012 amid recent signs of improved confidence in the property market, an industry body has said.
The Council of Mortgage Lenders (CML) expects the figure for this year will reach £156 billion, despite a dip last month when £11.7 billion was lent, compared with £12.7 billion in November and £12.2 billion for the same month a year earlier.
CML chief economist Bob Pannell said: "We are more positive about the UK housing market and wider economy than a year ago, despite economic headwinds and downside risks."
He added that lenders now faced fewer funding pressures, in part as a result of the Bank of England's and Treasury's Funding for Lending scheme, which was launched in August and has enabled several lenders to slash their rates.
The CML said market activity was robust in the final quarter of 2012, helped by better mortgage availability and pricing - a trend it expects to continue in the coming months.
For most months in 2012, house purchase lending was above year-earlier levels, while first-time buyer activity accounted for an unusually large 41% of all house purchase loans in December for the second month in a row.
Despite the Funding for Lending initiative, separate figures from the Bank of England showed a further contraction in lending to businesses, down by £4 billion on a year ago in the three months to November.
The Bank said this was likely to reflect the desire of firms to pay down debt as quickly as possible, while major lenders have indicated that they expect lending to small and medium-sized firms to increase slightly in 2013. Larger companies have access to more funding sources than smaller companies, it added.
Matthew Fell, CBI director for competitive markets, said: "Weaker demand for finance among small and medium-sized businesses indicates that they are still lacking confidence to invest, so raising awareness of available schemes is crucial."
He added that plans for a British business bank should be put into action without delay to ensure Government support is visible and reaching businesses that need it most.