Mortgage brokers are predicting a "significant" pick up in business during the third quarter of the year as buyers return to the housing market, research showed today.

Around 58% of brokers expect to arrange more mortgages during the coming three months than they did in the second quarter, a third of whom expect to see a 10% rise in business, according to mortgage provider Paragon Mortgages.

Overall, brokers expect to do 8% more business during the coming three months - the second consecutive quarter for which they have predicted an increase in business levels, following a contraction in the intermediary market during 2008.

The main driver behind expectations of an increase in business levels is signs that buyers are beginning to return to the property market.

Brokers also expect growing numbers of existing homeowners to remortgage during the coming months, in the hope that they can lock into low interest rates before the cost of borrowing starts to rise again.

Record low interest rates had previously meant many people coming to the end of a mortgage deal had opted to stay on their lenders' standard variable rate, as in many cases this has been lower than other rates available.

But there are now signs that people are once again beginning to remortgage on to fixed rate loans.

Only 7% of brokers expect to arrange fewer mortgages during the third quarter than in the previous three months, well down on the 19% and 39% of brokers who expected a dip in business during the second and first quarter of the year respectively.

One in five brokers have increased their staff levels in anticipation of an up turn, with one in 10 raising them by 25% or more.

John Heron, managing director of Paragon Mortgages, said: "We are starting to see concrete signs of confidence returning to the mortgage market and that can only be a positive for the UK housing market.

"Mortgage brokers have endured some tough times in the past 18 months so it is welcoming that the market is finally seeing some positive news.

"However, the mortgage market cannot fully recover unless more is done by Government to increase the availability of mortgage finance to consumers. Lending is still at very low levels as lenders seek to retain capital and normal funding avenues remain closed."

He said mortgage availability was still relatively scarce and only borrowers with high deposits were able to secure the most attractive rates.