Total mortgage lending rose in October to its highest level since July, driven by a large increase in remortgaging, the CML says.
Remortgaging once again hit record levels, accounting for 43% of total lending in October. It totalled £8.9bn, the highest monthly figure since the survey began and 22% higher than the £7.3bn recorded in September. Lending for house purchase remained stable.
Gross lending reached £20.9bn in October, up from £19.1bn in September and similar to the levels in July and August. Loans for house purchase totalled £10.4bn (the same as in September, and lower than in July and August), and accounted for 50% of total lending.
Average rates of interest on new loans fell in October, further adding to the attraction of refinancing into cheaper deals for consumers. Average new variable rates fell to 4.28% from 4.42% in September, while average new fixed rates fell to 4.9% compared with 5.12% in September. 28% of loans were taken out at fixed rates and 72% at variable rates during the month.
CML director general Michael Coogan says: “Total lending rose again in October, not least because remortgaging is running away. It seems highly likely that most people who are remortgaging may also be releasing equity, contributing to the Bank of England's concerns that equity withdrawal is fuelling consumer spending. This situation is unlikely to resolve until house price inflation begins to slow down.
“We expect to see house price growth slowing in 2003, although it may still remain in double figures for much of the year. In the meantime, borrowers need to remember that although mortgages are cheap at the moment, inflation will not reduce their debt burden as quickly as it did in the past.”
The CML will be publishing its revised forecasts for 2003 and 2004 at the beginning of December.