20th November 2013
Mortgage lending is projected to have soared to £17.6bn in October, almost 40% higher than the same period last year and the highest monthly estimate for five years writes Philip Scott.
According to the trade body the Council of Mortgage Lenders (CML) which represents banks and building societies, mortgage loans were 37% higher than October 2012’s figure of £12.9bn and were up by 9% from September’ 2013’s figure of £16.2bn.
The organisation said this represents the highest monthly estimate for gross lending since October 2008’ s £18.6bn total.
Commenting on the activity, CML chief economist Bob Pannell says: “Housing activity is set to strengthen further in the short-term, and to contribute materially to overall economic growth.
“Combined with the Bank of England’s recent optimism about the economy, this has led some commentators to speculate that an early rate rise may be on the cards. We do not currently share this view, which we believe underplays the importance that the MPC attaches to a secure recovery before raising rates.”
The marked increase in mortgage lending will undoubtedly fuel concern that the nation is on its way to another housing bubble but Howard Archer, chief UK & European economist at IHS Global Insight says: “We currently suspect that house prices could rise by around 1.5% over the final couple of months of 2013 and then increase by 8% in 2014. While these projected house price rises are expected to be driven by increases in London (especially) and parts of the South East, house prices are likely to strengthen appreciably in most regions and to make gains across the country.
“While the strength of house price rises in London is a serious concern and is pushing up the national increase in house prices, we are currently some way off from an overall housing market bubble emerging. In fact, in many areas house prices are still well below their 2007 peak levels and rising only modestly at the moment.”