The latest National Mortgage Index from Mortgage Advice Bureau also claims remortgage applications for fixed rates rose to 84.2%, some 15.8% higher than at the start of the year.
The increases follow a rise in the number of products and a fall in average fixed rates as pricing competition among lenders intensified in August.
The average 2 and 5-year fixed rates were down compared to July with average 5-year fixed rates falling 0.14% to 4.73%.
Alongside the traditional summer lull in August, the impact of the Olympics and Paralympics had been expected to have a negative effect on application levels, but this was partially offset by the official launch of the Funding for Lending scheme on 1 August 2012.
As such applications for purchase and remortgage borrowing fell just 4.16% from the level in July, and purchase activity remained 14% higher than it was at the start of the year.
Brian Murphy, head of lending at Mortgage Advice Bureau, said: "We saw a growing number of lenders releasing more competitive products as a result of the Funding for Lending Scheme. In particular, we’ve seen a marked increase in the number of fixed rates, demonstrating that borrowers are seeing real value in both the price and security they offer.
“In August, we saw an increase in competition among lenders both in terms of pricing and also in numbers, with the number of products available on the rise. As such we expect this will start having more of an impact on activity this month and that September will be a strong month in terms of new applications.”
