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Mortgage lending reaches record high

20th September 2006 | back to article listings BACK    print this article PRINT

Mortgage lending is on the rise again as it broke yet another record last month, causing analysts to praise the shape of the housing market.

The Council of Mortgage Lenders (CML) reports findings that gross mortgage lending reached £32.7 billion, 7.2 per cent higher than July and 21 per cent above the amount leant in the same month in 2005. It also became the tenth monthly record of the last year.

Supporting the findings, albeit using a different means of measurement, the British Bankers Association (BBA) said that it is not just homeowners who are requesting loans to buy property; lending to real estate companies rose by £1.5 billion suggesting a wider demand for rental housing.

David Dooks, BBA director of statistics, made the point that the "buoyancy in mortgage lending is contrasted by the trend in consumer credit" where credit card, personal loan and overdraft borrowing has been weakening over the course of the year.

This implies that affordability pressures have forced participants in the housing market to make a stark decision between personal spending and payments on their home, with the majority choosing the latter as the most sensible option.

With such importance ascribed to accommodation in these days where it is in very short supply, it appears that the housing market is not due to slow down as much as sales in high street stores.

Michael Coogan, the CML director general, said: "With financial markets still expecting an increase in interest rates sometime between now and the middle of next year, we forecast that house price growth and strength of demand will moderate, as consumers anticipate higher rates."

However, he added: "This level of lending is sustainable and illustrates the market is in fundamentally robust shape."

The Royal Institute of Chartered Surveyors (Rics) echoed this optimism, saying that the surge in mortgage lending is "of little surprise coming on the back of a strong upturn in buyer enquiries" recorded by their own survey last month.

Demand for housing is clearly still very strong in the UK and despite the growing concern that interest rates will be raised again in November, today's evidence suggests that homeowners will be willing to sacrifice spending of everyday luxuries in order to secure that all-important mortgage.

Therefore, it may be some time before the market slows down in the manner that some analysts have been predicting.

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