Mortgage lending hits February high

The housing market continued its strong start to the year as mortgage lending in February reached record levels for the month, figures showed today, although there are signs of a slowdown in activity.

The Council of Mortgage Lenders (CML) said its members had lent a total of £21.8bn over the month, as activity in the market continued to pick up.

Although the figure was down 5% on January's total of £23bn, it was 22% higher than the figure for February 2005 and a record figure for what is traditionally a weak month.

The CML's director general, Michael Coogan, said the figures showed confidence had returned to the market.

"Areas which saw sluggish activity over the past couple of years such as London and the south-east are now seeing a clear strengthening in house prices," he said.

"House buying activity and mortgage lending looks set to remain well supported over the coming year. The economy is in good shape and interest rates look stable."

However, Mr Coogan said the latest mortgage approval figures suggested the upward trend in activity might be drawing to an end.

"If that does happen, it would be in line with our forecasts of some moderation in activity through the year," he said.

His comments were backed up by Howard Archer, chief UK economist at consultancy Global Insight.

He said: "While the February mortgage lending and approval data were still relatively healthy overall, there were indications that housing market activity is levelling off after several months of improvement.

"In particular, slightly softer mortgage approvals data (from the Building Societies Association and the Council of Mortgage Lenders) could be an early sign that the recent firming in house prices is starting to have a dampening effect on activity.

"The data reinforce our suspicion that house prices will be unable to sustain sharp gains for an extended period."

Figures from the British Bankers' Association (BBA) show that unsecured lending grew at a slightly faster rate in February than the average for the previous six months.

Personal lending was up £0.7bn over the month, with borrowing on loans and overdrafts accounting for £0.5bn of the rise. Saving levels were high in February, with the BBA reporting a £3.6bn increase in deposits from the private sector, compared with an average growth of £2.4bn in the past six months.

Meanwhile the Building Societies Association (BSA) said the amount invested in accounts run by its members was the highest for any February since 1997.

Net receipts into savings accounts were £868m, compared to £409m in February last year.

However, despite the approach of the Isa deadline it said deposits into cash Isas were down £11m on the previous year, with net receipts for February totalling £129m.