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New record for December mortgage lending

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In spite of the climate of rising interest rates, gross mortgage lending set a new December record last month, quashing fears that the housing market is due for a downturn in the short run.

On the whole, lending totalled £29.4 billion in December. Although this was down by 11 per cent on November's figure, the total amount borrowed was eight per cent higher than in the same month in 2005, according to new data from the Council of Mortgage Lenders (CML).

December is usually a slow month for house purchases and mortgage approvals because people are more concerned with Christmas and getting their finances in order for the new year so the news that last month set yet another record for mortgage lending shows that the housing boom has some steam left yet.

Over the course of the year, lending totalled a record £346 billion, 20 per cent higher than a year ago demonstrating that 2006 was an extremely buoyant year for the housing market and a profitable one for investors.

This is because these lending figures have been fuelled primarily by house price increases, as the CML explained in a statement.

"Although remortgaging grew by around six per cent in 2006, lending growth was driven mainly by house price inflation of around seven per cent and a rise in the number of property transactions," it read.

The CML continued to predict a healthy future for the coming 12 months.

"It has been obvious for months that those predicting a housing market crash last year were wrong. As we move into 2007, the market remains in good shape and expectations for the rest of the year and beyond are good."

The figures also revealed that pressure is intensifying for first-time buyers, meaning that the rental sector is likely to also remain strong over the course of 2007. The CML found that the average novice to the property market was borrowing 3.29 times their income in November, up from 3.08 12 months previously.

For the second half of 2006, the number of mortgages in the buy-to-let sector reached 768,000 and amounted to £84 billion, accounting for over eight per cent of total mortgage assets.

When set in the context of eight years ago, when there were just 29,000 buy-to-let loans worth just £2 billion, it is clear how much the sector has grown of late and this growth shows no sign of abating in the near future.

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