Mortgage lending hits five-year high

MORTGAGE lenders have reported their strongest month in almost five years, in further evidence that the housing market is bursting back into life.

Mortgage approvals are at a five-year high. Picture: Jane Barlow

An estimated £16.6 billion of mortgages were advanced to borrowers in July, marking the highest total seen since October 2008, the Council of Mortgage Lenders (CML) said.

This means that mortgage lending has soared by almost one-third (29 per cent) compared with the same month last year, as well as climbing by 12 per cent on the previous month.

The figures are the latest in a series of reports pointing to a housing market revival, with some particularly strong evidence seen in recent weeks.

Last week, the CML, which represents banks and building societies, reported first-time buyer numbers have risen to their highest levels since 2007, while the Royal Institution of Chartered Surveyors (Rics) said that house prices were rising at their fastest rate since 2006.

Meanwhile, asking prices on flats have reached an all-time high, property search website Rightmove reported yesterday. It put this down to strengthening demand for this type of property from people trying to take their first step on the property ladder, as well as buy-to-let investors who are being encouraged into the market by reports of decent returns to be made.

Asking prices in London are up by 10 per cent compared with a year ago as confidence flows back into the market, according to Rightmove’s findings.

CML market and data analyst Caroline Purdey said the body’s lending figures for July reinforced “a growing evidence base of a strengthening in the housing and mortgage markets”.

UK government schemes such as Funding for Lending have been credited with boosting activity by widening mortgage availability. Initiatives such as NewBuy and Help to Buy have also been launched to support those with smaller deposits.

The strength of the uplift in house prices seen already this year has taken some experts by surprise. And concerns have been raised about the potential for a house price bubble to be created following the second phase of Help to Buy, which from next year will underwrite £130bn of low-deposit mortgage lending with state guarantees. Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Borrowers must not get carried away – buy sensibly – and take care not to overstretch themselves.”

He said that, despite the strong uplift reported, the housing market recovery will be “long and slow”, adding: “Lending levels are still running at a fraction of what they were at the height of the housing boom.”

There have also been calls for the government to step up its efforts to build more homes as activity lifts.

Housing charity Shelter recently warned that fewer than half the houses were being built in England each year than were needed to tackle the “chronic shortage of homes”.

Housing minister Mark Prisk said: “The figures show our Funding for Lending Scheme and record low interest rates have led to the highest level of mortgage lending since 2008.

“We’re also pulling out all the stops to get Britain building, and the increased availability of mortgage finance is boosting confidence in the housing market, and encouraging housebuilders to invest in building.”