Mortgage lending breaks December record

The mortgage market ended the year strongly with figures published today revealing the busiest December on record.

The Council of Mortgage Lenders (CML) said an estimated £26.3bn was advanced to borrowers over the course of the month.

Typically lending figures fall in the run up to Christmas and this year was no different, with December's figure down 6% on November's, however the CML said the decline was smaller than in previous years. Despite signs at the beginning of the year that the market was slowing down, the figures showed gross lending for the whole year reached £287.5bn, down just 1% on the total for 2004.

The CML's director general, Michael Coogan, said: "Confidence in the housing market was supported by the realisation that short-term interest rates had peaked and the downward trend in fixed-term rates throughout much of the year, resulting in stable house prices.

"The second half of 2005 was characterised by strengthening housing market activity and increased mortgage lending. We expect this trend to continue into 2006 as mortgage approvals continue to rise."

Duncan Pownall, mortgage development manager for lender Bradford & Bingley, said the figures demonstrated the robustness of the lending market last year.

"Strength in the housing market combined with buyers' realisation that prices will not significantly fall has encouraged more and more people to step onto the property ladder.

"Over the coming year we anticipate increased activity in the first time buyer market in particular. While interest rates are expected to stay low and the housing market remains healthy, we will see more buyers 'take the plunge' realising it's better to buy now than pay later."

The body said its members had seen an upturn in mortgage lending in December, with the value of home loans paid out increasing by £5.4bn over the month, the strongest rise since June 2004 and slightly higher than November's £5.2bn rise.

However, figures from the British Bankers' Association (BBA) suggest that while confidence in the mortgage market may be returning, consumers are still wary of taking on other types of debt.

Despite the pressure to spend in the run up to Christmas consumers shied away from credit cards and personal loans. Borrowing across the market rose by £0.3bn during the December, compared with the £0.5bn averaged over the previous six months.

Of this credit card balances accounted for £0.2bn, while borrowing on loans and overdrafts remained virtually flat. The BBA said over the course of 2005 net consumer credit had increased by £6.4bn, compared with 2004's figure of £11.4bn.

While borrowing fell, the amount invested in savings accounts by customers grew. The BBA said the amount held on deposit was up £10.5bn on the previous year at £833bn. This was backed up by data from the Building Societies Association (BSA), which showed inflows into savings accounts were at the highest level for eight years.

"Net savings inflows in 2005 were the highest since 1997 and the second highest since 1988," said the BSA's director general, Adrian Coles. "Overindebtedness grabs the headlines, but these figures show that many people are sensibly looking after their future."