Mortgage lending has leapt by the largest amount since 2008, official figures showed on Tuesday, providing further evidence that the housing market is continuing to heat up.
The Bank of England said a total of 71,030 loans were approved for house purchases in August – the highest monthly figure for 19 months. This compares with an average of around 65,600 over the previous six months, and is up 20% on the levels seen as recently as November 2014.
The Bank also said total net mortgage lending rose by £3.4bn in August, compared with the £2.8bn rise in July – the highest figure since May 2008.
The figures come 24 hours after the Land Registry announced that house prices in England and Wales jumped 0.5% in August to reach an average of £184,682, and days after the Bank of England indicated it was concerned that the booming buy-to-let mortgage market could pose a threat to the UK’s banking system. It said it was looking at whether the boom could magnify falls and rises in house prices.
The mortgage lending figures come in the wake of a mortgage price war that has been driving home loan rates to record lows, and may reflect moves by some homebuyers to move quickly to lock into a competitive mortgage rate before interest rates start rising.
Ross McEwan, chief executive of Royal Bank of Scotland, said customers were moving from standard variable rates “because they are frightened of interest rates going up”. Most customers were going on to two- or five-year fixed rates with SVR mortgages now accounting for 18% of the bank’s mortgage lending compared with 25% a year ago.
Howard Archer, UK economist at consultancy IHS Global Insight, said the new data provided “more compelling evidence that housing market activity is on the up”, adding: “Stronger buy-to-let activity is also pushing up mortgage approvals.”
Archer said he was now expecting house prices to end this year up 7%, and then rise a further 6% in 2016, adding: “Higher interest rates are unlikely to have a major dampening impact on housing activity for some time to come, as the Bank of England is stressing that interest rates will only rise gradually and to a limited extent.”
Brian Murphy, head of lending at broker firm Mortgage Advice Bureau, said there were “no signs of a summer slowdown” in the mortgage market in August. “The remortgage market in particular has experienced a burst of activity, with approvals for remortgage rising more than twice as fast as those for house purchase year-on-year,” he said.
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