Gross mortgage lending hit its highest August level since before the financial crash, figures show, as the housing market appeared to defy fears of a crash after the Brexit vote.
The Council of Mortgage Lenders (CML) said its members had advanced a total of £22.5bn during the month, 7% higher than July’s figure and up 15% year on year.
The figure includes lending for remortgaging and house purchases by buy-to-let landlords as well as owner-occupiers, and does not take into account repayments as borrowers switch.
It records the point at which money is handed over to borrowers, so is likely to include loans arranged before and after the EU referendum vote.
The CML said the figure was the highest August total since 2007, when gross lending reached £33.6bn.
Mohammad Jamei, senior economist at the CML, said: “Widely voiced fears in recent months about the housing market have proved to be wide of the mark.
“Prospects for house purchase activity post-referendum look slightly subdued, when compared with late 2015 and early 2016. However, sentiment in the market recovered in August. This is reflected in stronger-than-expected transaction figures, and in our gross lending estimate.”
The Bank of England cut interest rates to a new low of 0.25% in early August, and banks and building societies have been lowering mortgage rates in response to that and to falling returns from government bonds.
Jamei said the Bank’s moves to stimulate the economy were likely to have helped support sentiment.
He added: “A subsequent uptick in [mortgage] approvals is anticipated, albeit still at levels lower than earlier this year as affordability constraints and lack of properties on the market for sale continue to bear down on borrowers.
“The Bank also continues to indicate another rate cut on the cards, if medium-term prospects remain unchanged.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said the figures corresponded with what he was seeing.
“Much of our business – as much as 70% – is remortgaging as borrowers look for some certainty while taking advantage of record low rates and snap up a cheap fixed deal,” he said. “With speculation that there is another base rate cut to come, mortgages are likely to remain extremely competitive, which should tempt further buyers to market, as long as they can find the property they wish to buy.”
The most recent report from the Royal Institution of Chartered Surveyors (Rics) suggested confidence in the property market had started to rise after falling sharply immediately following the Brexit decision. But Rics said there was still a shortage of stock for sale.
Howard Archer, chief UK economist at IHS Global Insight, said: “Solid fundamentals for house buyers – high employment, decent purchasing power and low mortgage rates – have remained a source of support for the housing market, while a shortage of properties has also supported house prices.”
However, he added: “With the economy showing resilience following June’s Brexit vote, we expect house prices to be essentially flat over the final months of 2016. The CML gross mortgage data dilutes belief that house prices may dip over the latter months of 2016.”
