Mortgage lending rose by 19.5% in March, latest data from the Council of Mortgage Lenders reveals.
A total of £24.5bn of gross advances was lent in March, up from £20.5bn in February and 25% higher than the £19.6bn lent in March last year. This level of lending was the strongest for four months, and could be a record when adjusted for seasonal factors.
Within this total, lending for house purchase showed the strongest increase. At £11.3bn, it was 24% higher than February's figure of £9.1bn, and 41% up on the £8bn recorded last March. Loans for house purchase accounted for 46% of all gross advances.
First-time buyer activity seemed to strengthen a little, with first-time buyers accounting for around 31% of new loans for house purchase. While this was lower than the 34% last March, the actual number of first-time buyers was around 34,000 compared to only around 30,000 last March.
But the increase in first-time buyers does not appear to be at the expense of lending quality, as average first-time buyer percentage advances and income multiples remained virtually the same as last month.
Remortgages accounted for 41% of the total, at £10bn. While remortgaging activity also continued to increase, the rise was more modest. Remortgaging was 12% up on the February figure of £8.9bn, and 7.5% upon last March's £9.3bn.
The profile of lending continues to show nearly three quarters of lending being taken out at variable rates, with only a quarter taken out at fixed rates. This is despite the fact that the differential between average new fixed rates and average new variable rates fell in March to 25 basis points, compared with 40 basis points in February.
Michael Coogan, director general of the CML, says: “It now seems clear that the housing market has experienced an upswing in the first quarter of this year. Buyers who could not decide whether to enter the market last year may now be deciding to buy because they thinkthey may be priced out of the market if they postpone their decision any further.
“But the scale of activity has been stronger than we would have anticipated, and the CML now expects the Bank of England to be watching the housing market very closely.
“The reality is that there is no consensus about the future direction of the market – or about how far interest rates may rise. So it is currently very difficult for borrowers to make their borrowing decisions. In these circumstances teh CML would urge borrowers to think carefully about how they would cope with higher interest rates.
“Given the plethora of hints and warnings about the likelihood of rate rises to come, it is perhaps surprising that more borrowers are not latching into fixed-rate deals now. It seems that the interest rate rises so far have had little impact on consumer behaviour.”