Mortgage lending hits ?100bn

Mortgage lending is set to top £100bn for the first time this year, with record levels of more than £10bn a month maintained since June.

Research by Barclays published yesterday showed advances to homebuyers running 28% higher between June and October than during the same period last year.

The bank's survey of all lenders disclosed that lending up to October this year was already close to £95bn, with its forecast of £100bn for the full year likely to be exceeded.

More than half of consumers - 58% - believe that their property will rise in value, compared with just 40% a year ago, while more are selling their homes; one in 12 are now prepared to put their home on the market.

But there could be a down side. Small mutual building societies are among the worst lenders for locking in their customers with redemption penalties and tagging on compulsory insurance.

According to research compiled from figures produced by Moneyfacts, a financial data provider, mutual societies such as Lambeth, Market Harborough, Norwich & Peterborough and Scarborough are offering products which have been condemned by the government and the Consumers Association.

The revelation is likely to surprise borrowers.

Both the government, which called a summit of the main mortgage lenders last month, and the Consumers Association have targeted their criticism at the larger lenders in the mortgage market.

The only two listed companies that continue to sell mortgages which penalise borrowers unfairly are Barclays and Alliance & Leicester - which last week withdrew its last remaining product with a redemption penalty.

The Consumers Association's Neil Walkling admitted that the smaller building societies have tended to continue to offer mortgages with compulsory insurance.

"The Consumers Association is usually quite supportive of building societies.

"In this particular case the small building societies are the worst. It's something we'd like them to get rid of," he said. However, he pointed out that there were only a handful of lenders in the tables that were still engaged in the bad practices, which the government wants to wipe out as part of its "rip-off Britain" campaign.

The government is considering introducing tougher regulation for the mortgage market under the financial services authority, the new City regulator.

Adrian Coles, director general of the Building Societies Association, defended the societies, suggesting that the lenders will be offering lower borrowing rates in return for any penalties.