Strongest August for gross lending since 2007

Gross mortgage lending was £20bn in August, down 8 per cent from July’s total of £21.7bn, but up 12 per cent on the same month last year, making for the strongest August since 2007, figures from the Council of Mortgage Lenders has revealed.

CML chief economist, Bob Pannell, says: “Mortgage lending is currently enjoying its best spell since 2008, on the back of a pick-up in house purchase and remortgage activity over the summer months. August’s lending of £20bn marks the third month in a row of strong year-on-year growth and is the highest August figure since 2007. We expect further modest growth for the rest of the year.”

IRESS, the software provider’s principal mortgage consultant, Henry Woodcock, says: “Mortgage lending finally came off the boil in August as the seasonal summer lull limited the overall activity undertaken in the month. However, the slowdown shouldn’t be misinterpreted as the market grinding to a halt. Mortgage rates remain at record lows, buoying demand, while we are also seeing a new flurry of low deposit mortgage products hitting the market. All of this bodes well for total lending levels for the remainder of the year, in spite of concerns of an interest rate rise. In the longer term, affordability will remain the key constraint for the market, preventing more rapid improvement. While wage growth is still showing promising growth, it is being outstripped by rising house prices, and we won’t see this growth subside until the supply and demand balance is addressed.”

IHS Global Insight chief UK and European economist, Howard Archer, says: “The CML gross mortgage data for August add to a stream of recent evidence that housing market activity is on the up. Indeed, it was the strongest August performance for gross mortgage lending since 2007.

“The robust August CML data reinforce our belief that house prices will see solid increases over the coming months. We expect house prices to rise 7% in 2015 and then by 6% in 2016. A significant upside risk to these forecasts is currently coming from the shortage of houses on the market.  

“We expect house prices to see solid increases over the coming months amid firm activity. We suspect housing market activity will be supported over the coming months by largely helpful fundamentals, notably including stronger earnings growth, high employment, elevated consumer confidence and still very low mortgage interest rates.”

 “Meanwhile,” Archer adds, “a limited stock of properties for sale is clearly exerting upward pressure on house prices.

“Nevertheless, the upside for housing market activity and prices is expected to be constrained by more stretched house prices to earnings ratios, tighter checking of prospective mortgage borrowers by lenders and the likelihood that interest rates will soon start rising gradually.”