Mortgage surge fuels housing boom

Demand for property has exceeded forecasts in 2006

Mortgage lending surged to record levels in September, according to the Council of Mortgage Lending (CML).

Gross mortgage lending totalled £29.5bn during September, down on the previous month but 7% higher than a year ago.

The figure represents a new record for the month of September, adding weight to the views of experts that the housing market is booming.

Separate figures from the British Bankers' Association (BBA) recorded credit card lending was lower.

The BBA said that credit card borrowing fell £100m during September.

September was the fifth month in a row that UK consumers had registered a net repayment on their credit cards.

House price growth and mortgage approvals continue to remain strong, so we should expect to see continued levels of robust lending over the coming months CML director

Market strength

Thursday's mortgage lending announcement seems to underpin recent data from major lenders and from the Bank of England, suggesting that the UK housing market is strong.

Both the Nationwide and Halifax have said that prices rose by about 1% during the month of September.

Overall in 2006, UK house prices have increased at a far faster rate than most analysts' forecasts.

The surge in house prices has been led by the London market, thanks to increased demand among first-time buyers and high levels of City bonuses.

"House price growth and mortgage approvals continue to remain strong, so we should expect to see continued levels of robust lending over the coming months," said CML director Michael Coogan.

However, Mr Coogan added that a rise in UK interest rates, widely anticipated to occur before the end of the year, would cause a slowdown in house sales and mortgage approvals in 2007.