Gross mortgage lending increased by 4.3% to an estimated 28.1bn in September, up from 26.9bn in August, according to the latest data from the Council of Mortgage Lenders.
This figure is one of the highest monthly lending figures on record, and 11% more than the 25.3bn of lending in September 2004.
CML say that since the beginning of the year there has been a relatively steady recovery in mortgage lending activity, which until recently had mainly reflected seasonal factors.
However, while it believes that the housing market is on course for a “soft landing” from the exceptional highs of 2003/04, recent months have seen the strong growth in mortgage lending, boosted by high levels of remortgaging as people take advantage of lower interest rates and switch onto cheaper deals.
The Bank of England’s mortgage approval figures also reflect the resilience of the housing market in the past few months. In August 107,000 mortgages were approved – the highest figure since the 110,000 of mortgage approvals in June 2004.
Buyers appear to have become more confident that current house prices are sustainable. The fact that interest rates seem to have peaked and look unlikely to rise sharply in the near future may also have helped reduce concerns about affordability.
Michael Coogann director general of CML, says: “Our latest data provides evidence that the housing market is in relatively good health, and households are not lacking confidence to take on mortgages.
“While expectations of lower interest rates have undoubtedly helped to trigger the recent resurgence in lending, we believe the Bank of England’s Monetary Policy Committee will put off cutting rates further until it is clear that inflationary pressures are easing.
“We would correspondingly expect lending activity to level off over the coming months.”
Duncan Pownall, mortgage development manager for Bradford & Bingley, says: This months figures are again encouraging. As gross lending increases to one of the highest monthly figures on record, 28.1bn, fears of a serious slump continue to subside.
“This recovery in mortgage lending has clearly been boosted by high levels of remortgaging as many borrowers on the cheap twoyear fixed rates of 2003 rebroke their loans to avoid a jump in their monthly mortgage payments.
However, it is not only home owners remortgaging who are bolstering this months figures. Home movers activity demonstrates increased confidence in the housing market as price growth stabilises.
“Latest Hometrack figures indicate a 5.5% increase in buyer activity, whilst RICS report an increase in demand, albeit modest. Encouraging signs that the bottom will not fall out of the housing market and that lending figures will continue to gain strength.