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New high for UK mortgage lending

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Ever rising asking prices are not yet stopping Brits' demand for mortgages as new figures show that lending last month reached record levels.

In what is normally a quiet month in the property market, gross mortgage lending in November reached £21.4 billion, 13 per cent higher than in October and 19 per cent higher than the same month a year ago, according to the British Bankers' Association (BBA).

Furthermore, underlying net mortgage lending – defined as gross lending minus repayments and redemptions – rose by £6.7 billion, a billion pounds more than in October and £5.1 billion more than November 2005.

And it seems that lending accelerated on the run-up to Christmas and the New Year. Last month saw 206,051 mortgage approvals for all purposes amounting to an aggregate value of £23 billion. This is 6.8 per cent higher in numerical terms and 20.8 per cent more in value than a year ago.

The average loan approved for house purchase amounted to £146,900 in November and when viewed in the context of research published yesterday (December 28th) by Nationwide that found the average house price to be £173,746, the scale of house hunters' commitments are revealed: house buyers are now forking out over £25,000 out of their savings to purchase a property.

David Dooks, BBA's director of statistics, argued that this demand was proof that the housing market will remain strong at least in the earlier part of 2007.

"In the mortgage market, the high number of loans approved in November, which is not usually a strong month, suggests that the trend in mortgage lending will continue to be robust over the next few months," he said.

Mr Dooks pointed out that the discrepancy between the annual growth in net mortgage lending at 14 per cent and consumer credit at two per cent is worthy of note.

"Monthly spending on credit cards and the value of new personal loans taken out have been generally lower in 2006 than in the previous couple of years, while repayment levels have been maintained, leading to this year's picture of subdued borrowing," he said.

A likely reason for this discrepancy is that people are choosing to invest in the property market as opposed to spending their money on consumer goods. The slow growth of credit card borrowing suggests that Brits are struggling with affordability issues – possibly due to high energy costs and mortgage repayments – but are continuing to direct their spending towards bricks and mortar.

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