Lending hits record high

Mortgage lending has reached a new high for the third month in a row, with the number of people using a loan to buy a house at the highest monthly figure since records began.

According to today's data, members of the Council of Mortgage Lenders (CML) lent a total of ?19.5bn for purchases and remortgages in May, an increase of 19% from April's figure.

The majority of money loaned was for purchases, rather than remortgaging, and totalled ?12bn, up from ?9.2bn the month before and a new record lending figure.

"Record figures for the third month in a row suggest that lending could now be on course to top ?200bn in 2002," said Michael Coogan, director general of the CML. "The strong growth in loans for house purchase reflects the strength of demand in the housing market, which is driving prices upwards."

While loans for purchases continued to rise, the number of first-time buyers taking out mortgages fell to its lowest level in over a year. Thirty-three per cent of loans were taken out by first-time buyers compared to a high of 44% in November last year.

For those first-time buyers who did take the plunge, the amount borrowed as a multiple of their income also rose to its highest level in a year. The average amount borrowed by this group in May was just over ?81,000, an average of 2.58 times salary. This was up from a multiple of 2.4 times salary and an average loan of just over ?72,000 in April.

The CML is calling for the Bank of England to raise interest rates in next month's meeting to avoid the possibility of sharper increases in the future.

"With rates at historically low levels, a modest rise in interest rates this summer would help ensure that the housing market is sustainable in the future without causing payment difficulties for the overwhelming majority of borrowers," said Mr Coogan.