Mortgage lending hits record levels

There were further signs of a pick-up in the housing market today as lenders reported record levels of mortgage lending in January.

The Council of Mortgage Lenders (CML) said the £23bn paid out by its members was the highest figure for January since records began. Although down 14% on December's figure of £26.9bn, lending was up by almost a third on last January.

Lending typically weakens at the start of a new year, but the CML said the figures for January showed consumers had confidence in the market and expected interest rates to remain stable.

"Mortgage lending in all categories has been strong in recent months," said the CML's director general, Michael Coogan.

"This reflects the fact that consumers are feeling more certain about the future of the housing market and confident that house prices are unlikely to fall.

"The interest rate outlook for the near future is for stable rates.

"The mortgage market looks set for continued steady growth against a backdrop of pretty positive economic conditions."

The Building Societies Association (BSA) said its members had seen a year-on-year increase in mortgage lending, advancing a total of £3.2bn to borrowers in January 2006, compared with £2.9bn in January 2005.

And it said the value of mortgages approved but not yet paid out had reached the highest level since November 2003 when seasonally adjusted, totaling £4.3bn.

Building societies also reported a strong month for savings, with inflows into accounts at their highest level for January since 2001.

Over the month the amount held in savings accounts grew by £2.12m, compared with last January when withdrawals reduced savings by £2.99m. This continued a trend towards saving seen in the latter part of last year.

"Normally credit card repayments and working off the Christmas 'financial hangover' result in outflows from savings accounts in January," the BSA's director general, Adrian Coles, said.

"The figures confirm the emerging trend of strong savings which became apparent in the second half of 2005."

However the latest figures from the British Bankers' Association (BBA) suggested consumers' appetite for unsecured debt may be picking up.

Over the past few months the BBA has reported a slowdown in borrowing on loans, overdrafts and credit cards. In January this type of lending increased by £0.7bn, compared with an average of £0.5bn over the previous six months.

Loans and overdrafts accounted for most of the rise, with borrowing increasing by £0.6b over the month. New borrowing on credit cards was up by just £0.1bn.

Meanwhile, the BBA said growth in mortgage lending by its members in January was down on the previous month's figure, at £4.6bn. Although a marked reduction on December's total of £5.3bn, this was only slightly lower than the previous six months' average of £4.7bn.

Commenting on the figures, the BBA's director of statistics, David Dooks, said: "The underlying rise in mortgage lending was close to trend in January, suggesting that stronger growth towards the end of 2005 may not have established a sustained upturn in lending.

"A stronger rise in consumer borrowing, largely through loans and overdrafts, was seen in January, but followed very subdued growth in the previous couple of months, so again this should not be viewed as a sign of changing demand for unsecured borrowing, particularly with reported retail sales being weak".