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UK mortgage lending soars

5th January 2006 | back to article listings BACK    print this article PRINT

New figures reveal that mortgage lending in the UK increased by £1 billion in November reflecting the injection of confidence that the UK property market has received in the last few months.

The report from the Bank of England indicates that after repayments, individuals borrowed a total of £9.6 billion during the month. This is £700 million more than the total amount borrowed in October and £800 million higher than the six month average.

Encouragingly, £8.7 billion of the overall borrowing figure was secured on property, which represents an increase of 10.3 per cent on the corresponding figures from November 2004.

Dismissing claims that the market was set for a crash, this was the biggest monthly increase since July 2004, with this 16-month record reaffirming the general consensus that 2006 will be a strong year for property investment in the UK.

Furthermore, the number of loans for buyers increased by 2,000 to 115,000 which is its highest level since May 2004. The value of the loans has now reached £14.6 billion.

The Royal Institute of Chartered Surveyors (Rics) has said that the figures reveal a level of mortgage approvals higher than the average for the last decade. It also observed a year-on-year increase in approvals that has not been matched since December 1982.

Rics went on to suggest that there is no reason for the trend to be discontinued in the near future, with 2006 likely to see mortgage approvals rising again.

"With interest rates likely to fall further in the next few months, we expect current firm market conditions to be maintained. As a result, mortgage approvals are likely to hit 1.33 million in 2006 compared to an expected total of 1.2 million for 2005, but still below the 2002 level of 1.42 million," Rics said.

In its November housing market survey, Rics provided further good news to property investors in the UK, with the number of would-be buyers making enquiries rising for the sixth consecutive month.

According to Rics, robust employment conditions and rising earnings have been instrumental in maintaining housing demand in spite of a cooling of the overall economic climate.

Rics' assessment of a "cooling" in conditions seems to undersell the current situation, however, with Reuters reporting today that an index of business activity, compiled for the Chartered Institute of Purchasing & Supply and the Royal Bank of Scotland, rose to 57.9 in December from 55.8 in November.

Household demand has now been isolated by the Bank of England as the principle factor in economic expansion which it believes will accelerate throughout 2006.

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