Lending to home-buyers breaks monthly record

According to the latest survey from the Council of Mortgage Lenders (CML), borrowing for house purchase topped £11.5 billion in August – the highest figure since CML monthly records began.

This figure now accounts for 48% of total lending and compares with £11 billion (45%) in July, and £10.8 billion (52%) in August last year. The proportion of lending for house purchase was just 35% in April and May this year.

Remortgaging was still strong, say the CLM, at £9.4 billion (40% of the total). This was lower than July's £10.5 billion (43%), but up on last August's £8.2 billion (40%).

The survey also found that the average rate charged on a new variable rate mortgage was 3.94% in August. Interestingly, the average rates charged on mortgages fixed for 1-2 years and 2-5 years were very similar to this. But the average rate charged on a mortgage fixed for more than five years was 4.27%.

In August, three quarters of home-buyers who took out fixed rate mortgages chose ones that were fixed for 1-2 years, a fifth chose 2-5 year products but only 4% picked ones longer than 5 years.

CML Director General Michael Coogan, said: "The latest figures continue to tell a story of a housing and mortgage market that is buoyant, but difficult for first-time buyers to enter.

"But the swing back in house purchase lending supports the view that the housing market saw a resurgence in confidence following the end of the war in Iraq, further amplified by the unexpected interest rate cut in July.

"The housing and mortgage markets have remained stronger for longer than we expected earlier this year. But we continue to expect a slowdown in house price growth - early evidence of this is already emerging. And people borrowing now should factor in an expectation of higher interest rates next year."

(gmcg)