Mortgage debt breaks £1 trillion barrier

Britain's collective residential mortgage debt has broken through the £1 trillion barrier, figures from the Bank of England showed today.

Homeowners now owe a combined total of £1,006,796,000,000, after a £9.3bn increase in mortgage lending in May. This was above the increase recorded in April and the average of the past six months.

In addition, the Bank said more than £29bn worth of secured lending had been approved during the month, with 117,000 mortgages worth £15bn approved for house purchases, and 102,000 loans offered to remortgagors.

The value of mortgage lending has been driven up in recent years by the housing boom, as people have had to borrow increasingly large sums of money to get on to the property ladder or to move up it.

Figures published earlier this week by the British Bankers' Association (BBA) showed that the average mortgage for house purchases was £139,300, compared with just £100,800 in January 2004.

Looking back further, in January 2000 BBA figures show homebuyers were borrowing an average of just £66,100 - less than half the amount needed today.

But despite a slight increase last year in the number of people falling behind with repayments and having their homes repossessed, there are few signs that consumers are overstretching themselves with mortgages.

The Council of Mortgage Lenders (CML) said that the average person taking out a mortgage during 2005 spent just 15.3% of their income on interest payments, just over half the 26.5% of their pay people needed for payments in 1990.

Furthermore, CML said UK homeowners had £3.6 trillion worth of unmortgaged equity in their properties.

Sue Anderson, CML spokeswoman, said much of the concern over consumer indebtedness centred on unsecured borrowing and there was no reason to suspect a rise in repayment problems simply because mortgage lending had passed the £1 trillion mark.

"While there are no doubt reasons to look with a more cautious eye at individuals' borrowings, because we expect interest rates to rise and we don't expect house prices to increase very much, the fundamentals of the market are actually pretty strong," she said.

The Bank's figures are in line with those reported by the BBA earlier this month, which also showed a record rise in new mortgage lending during May, and a rebound in the number of new loans approved.

The figures suggest the mini-boom seen in the housing market earlier this year could still have further to go.

Economists had speculated that the revival was running out of steam after the number of mortgages approved for buying a house had fallen during two of the first four months of the year.