Mortgage lending hits record

The house market remains strong

Mortgage lending hit a new record in September, the Council of Mortgage Lenders (CML) has said.

Total mortgage lending was £25.7bn in September, putting it on course to touch £270bn in 2003, substantially higher than the £219bn advanced in loans in 2002.

It is the third month in a row that mortgage lending has breached records, and the CML said it sees no sign of a slowdown.

We expect lending to remain strong for the rest of this year CML Director General Michael Coogan

"We expect lending to remain strong for the rest of this year and into next year - until the impact of predicted increases in interest rates feeds through," said CML Director General Michael Coogan.

'Plan ahead'

With the Bank of England widely expected to raise interest rates, Mr Coogan said that mortgages continue to remain affordable but warned that borrowers on variable rates "need to plan ahead for higher borrowing costs".

Demand for new loans to buy houses remains bouyant, but the latest figures reinforce the fact that it has been strong demand for remortgaging that has driven up overall lending figures, the CML said.

Loans for new house purchases excluding remortgaging were £11.9bn in September, giving a new quarterly record of £35.2bn.

Total house purchase loans to end-September were £84.5bn.

First timers

This was lower than for the £87.2bn borrowed for home buying in the first nine months of 2002, and points to the popularity of remortgaging.

The mix of low interest rates and soaring house prices have encouraged many homeowners to remortgage.

They have also sparked a trend for homeowners to borrow against the value of their homes for home improvements, holidays and other large-scale personal spending.

There were fewer first time buyers than a year ago. They accounted for 31% of house purchase loans in September, down from 38% in September 2002.

Mortgage lending figures from major British banks also showed a rise in September of £5.5bn.

This was slightly more than in each of the previous two months, the British Bankers' Association (BBA) said.

Credit cards

Figures for lending on personal loans and credit cards further revealed Britons' continued reliance on credit.

The BBA said the underlying rise in unsecured personal lending was £900m, "slightly above" the recent monthly average of £800m.

"Within this, stronger growth in card borrowing offset weaker demand for personal loans and overdrafts," it said.

The rise in non-mortgage personal borrowing in September was slightly more than the previous month's rise of £7.7bn, though much in line with the recent monthly average, the BBA said.

BBA members include HSBC, HBOS, Royal Bank of Scotland, Lloyds TSB, and Barclays.