Rush for cheap mortgages boosts lending
A rush of people looking to snap up cheap re-mortgage deals over the summer, as well as people buying homes, contributed to the strong figure.
Mortgage lending in August was slightly down on July’s lending total of £21.7 billion, but 12 per cent higher than August last year, when loans totalling £17.8 billion were handed out.
A mortgage price war had broken out between lenders, with many slashing the rates on their deals to the lowest they have ever offered.
But there have recently been signs of lenders starting to tweak their rates upwards, and speculation about the possibility of the Bank of England base rate rising from its record 0.5 per cent low, prompting some mortgage holders to lock into a cheap deal before it disappears.
Bob Pannell, CML chief economist, said: “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 £20 billion 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, although affordability pressures are likely to limit gains for first-time buyers and home movers.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said that despite fears that some of the best of the fixed-rate mortgage deals have already gone, “lenders have good capacity to lend, with five-year deals still available at less than 2.5 per cent”.
He said that the mortgage market remains “over supplied”, with lenders having more money to lend than there are people looking for mortgages, meaning lenders will have to keep the rates they are offering competitive.
Mr Harris said: “With talk of a rate rise on the horizon, and some excellent deals available, it is a good time to re-mortgage and the number of borrowers doing so is rising accordingly.”
Jody Baker, head of money at the price comparison website comparethemarket.com, said: “As shown by the increase in queries from June, the anticipation of a rate rise may have had a stoking effect on the broader mortgage market. With sky-rocketing house prices in the UK, the huge increase in the volume of queries from June appears to show that consumers want to be part of the action.
“If the property market continues to heat up, this may play into the hands of consumers as increased competition amongst lenders could help keep interest rates low.
“As house prices soar, affordability is likely to reduce. As a result, the type of mortgage that consumers sign up to is becoming increasingly important. It is essential that those looking to get a mortgage or re-mortgage shop around to see who offers the best rates.”
The Council of Mortgage Lenders’ members are banks, building societies and other lenders who together undertake around 95 per cent of all residential mortgage lending in the UK. There are 11.1 million mortgages in the UK, with loans worth over £1.3 trillion.