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Friday, 29 June, 2001, 14:32 GMT 15:32 UK
House prices set for summer boom
Interior of London flat
There was a record rise in loans for homebuyers
New figures suggest that the UK's housing market is set for a summer boom.

The latest Bank of England statistics show that there was a record rise in mortgage lending in May.

House prices seem destined for a return to double-digit growth this summer

Danny Gabay
JP Morgan
The increase means that demand for houses will be strong, and this is likely to push prices higher in the months ahead.

Housing inflation could now rise more quickly than the current annual rate of 7-8%.

The surge of interest in mortgages is matched by a price war between high street lenders competing for business.

Record growth

In May, the number of new mortgages approved rose to 107,000, up from 100,000 in April and well above the recent monthly average of 98,000.

These new loans totalled 4.23bn in May compared to 3.82bn the previous month.

UK lending in May
107,000 new home loans
4.23bn of new home loans
1.3bn consumer credit
5.6bn total loans
That is the highest monthly rise since records began in 1993, and 8.4% above the level of a year ago.

Borrowers have been enticed by cheaper loans following the Bank of England's three interest rate cuts.

Strong consumer confidence

The housing market is an important measure of consumer demand and perceptions of personal wealth.

General consumer confidence remained strong during May, with consumer credit - which includes personal loans and credit cards - increasing by 1.3bn.

Total lending to individuals - including mortgages and personal loans - grew by 0.8% to 5.6bn.

But the strength of UK consumer spending makes future interest rate cuts more unlikely which may in turn dampen the demand for loans.

"House prices seem destined for a return to double-digit growth over this summer, but should then cool as interest rates stop falling," said JP Morgan economist Danny Gabay.

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