UK mortgage lending hits record high

Gross mortgage lending reached a new record of £34.2 billion in June - up from £31.4 billion in May - according to data from the Council of Mortgage Lenders (CML).

This is due to seasonal effects and borrowers' response to higher interest rates. Although lending in June was up by 9% on May, this was a lower monthly increase for June than in each of the last two years (12% in 2006 and 15% in 2005).

As we move into the autumn, we expect to see strong levels of lending continue, reflecting the growth in mortgage approvals over recent months and more borrowers exiting short term fixed-rate deals. But the mix of transactions is changing with our expectation being a higher percentage of remortgaging, to minimize potential payment shock, and lower numbers of house purchases as fewer people chose to move.

Commenting, CML Director General Michael Coogan said: "Despite the record level of mortgage lending, there are signs that the market is feeling the cumulative effects of the five interest rate rises we have seen over the past year. This effect will become much more evident in the coming months as borrowers with fixed-rate mortgages come off their existing deal into a significantly higher interest rate environment.

"While the markets still expect one more interest rate rise before the end of the year, we believe the Monetary Policy Committee should carefully assess the impact of past rises on inflationary pressures before it takes further action. In the meantime, borrowers should be thinking seriously about how they will afford higher mortgage payments if they come out of a fixed-rate deal this year."

Figures from the British Bankers’ Association (BBA)

Total sterling lending to the UK private sector rose by an underlying £11.7bn net (+0.9%) to £1,331bn. This compares with an underlying rise of £18.9bn in May and an average of +£12.1bn over the previous six months.

Net mortgage lending rose by an underlying £5.1bn. This was lower than both the previous month (£5.8bn) and the recent monthly average of £5.3bn. Unsecured personal borrowing was virtually unchanged in June, having fallen by £0.5bn in May. Underlying credit card borrowing fell by £0.1bn, while loans and overdrafts rose by £0.1bn.

Lending to real estate companies rose by an underlying £0.6bn while lending to construction increased by £ 0.3bn, wholesale trade & garages by £0.3bn and transport, storage & communication by £0.2bn.

Deposits from the private sector rose by £8.3bn (+0.8%) to £1,004bn. Personal deposits increased by £3.0bn, very much in line with the recent average monthly growth of £3.1bn.

David Dooks, BBA director of statistics, said: “The contrast between May’s strong rise in mortgage lending and a much weaker figure in June makes it difficult to gauge the current impact of higher interest rates on mortgage demand but we’ve seen the trend gradually slowing since the turn of the year.

Consumers’ appetite for unsecured borrowing on cards, loans and overdrafts remains relatively flat and with personal deposits holding up, household budgets, though clearly tightening, seem to be in good shape.”