"We're probably seeing three times the volume of applications compared with this time last year," said Adrian Hanley, head of equity lending at NAB.
"We have had a significant lift in new client activity in the fourth quarter of 2012."
Mr Hanley said the push was coming from self-directed retail investors.
"Savvy clients have been well aware of the potential carry trade where the return should exceed the borrowing cost and hopefully become a growth engine," he said.
Brian Phelps, head of margin lending at CommSec, said that more than $57 million had been drawn down on existing lines since January 1, and "new accounts are running 60 per cent above the level they were on July 1".
The S&P/ASX 200 closed yesterday three points lower at 5033.9 but rose 1.3 per cent over the week to its highest level in more than three years, boosted by strong profit results from key companies. Chris Selby, head of private wealth at Deutsche Bank, said he had seen many wealthy investors moving strongly from cash to high-yielding equities, with less affluent retail investors subsequently following the same pattern.
"People are more willing to draw down debt. We've had more loan applications this month than for a very long time, from a combination of existing clients and new loans, migrating back to a 'risk on' culture," he said.
Mr Selby said the quality of some collateral being offered had definitely lowered from blue-chip stocks to less liquid issues, but lending standards, at least at Deutsche Bank, were at no risk of dropping.
"I hope the whole margin lending industry is being disciplined about loan to valuation ratios," he said. "It helps that a lot of the lending against baskets of quality stocks that we are seeing is based on proper planning strategies on the part of clients."
He said that once markets started to move up, the loan to valuation ratio of borrowings improved "and it feeds on itself on the upside".
But fund manager Geoff Wilson, whose WAM Capital fund climbed in value by 25.9 per cent in the 12 months to the end of January, against a market climb of 18.7 per cent, said that it was still only the more market-aware investors who had moved heavily into equities.
Moving down through investor categories towards ordinary retail investors, "there is plenty of talk but there are still billions of dollars sitting on the sidelines", he said.
"But this market lift has certainly caught everyone's attention," he said.
"In fact, there are a lot of people who've seen the S&P/ASX 200 index go up through the 5000 level during the week and who think they may have missed the lift in the market, so they may be still sitting on the sidelines waiting for a dip before they go in.
"What's likely to happen is that if the market does drop back to around the 4800 level, those people will all come piling in and push prices up higher than where they are now."
The margin lending business, where financiers take on baskets of stocks as collateral against loans used to buy other stocks, is a good barometer of market sentiment because of its leverage effect.
The Reserve Bank first started keeping numbers on the industry in 1999, noting it had lent $4.7 billion overall, but that number climbed through $10bn in 2002 and streaked out to a record $41bn in the last quarter of 2007, when the Australian market index peaked on November 1 at 6828.7.
Retail investors will not need reminding that it has been various forms of downhill since then and a year later, in the December 2008 quarter, the dire state of the sharemarket, then around the 3500 level or just above half its previous level, meant the number of margin calls exploded from 158 a day in the December quarter of 2007, when the market turned down, to a staggering all-time high of 2001 a day.
By then the total of margin loans outstanding had also crashed back to $23m as investors frantically de-leveraged.
Even after the market turned back up again in March 2009 (after a low of 3145.5) the industry was effectively on its knees because many of its clients had seen their already significant losses magnified by the leverage effect of margin lending.
"Leverage works both ways," said one industry veteran yesterday with what sounded like a shudder.
The biggest margin lending casualty of the global financial crisis, in Australia at least, was Melbourne's Opes Prime, which went under in March 2008.
Rather than take blue-chip shares as collateral, Opes Prime made a bull market niche for itself by accepting parcels of less liquid stock as collateral.
The problem which ensued, and carried down with it the reputation of many respectable margin lenders, was that clients had in fact signed away title to their collateral as part of the lending arrangement, in line with British but not Australian practice.
Many were depositing parcels of shares in small mining companies with Opes to buy more shares in the same companies.
That meant that when the market turned down, in some cases the clients were actually competing with Opes in a "seller, no buyer" market to liquidate the shares they had borrowed to buy, culminating in the painful experience of discovering that not only could they not sell the shares they had borrowed money to buy, but they could not get their deposited shares back either.
