Mortgage lending reaches new record

Mortgage lending broke new records in July as the number of people borrowing to buy a home picked up once again, figures showed today.

A total of ?25bn was advanced during the month, a total which represents a staggering 12% increase on June's figure - which was itself a new high, according to the Council of Mortgage Lenders (CML).

There were also signs that first-time buyers were returning to the market, with their numbers increasing to nearly 35,000 from 30,000 the previous month, although they still accounted for only 30% of all loans.

Lending for house purchases came to ?11.6bn, up 20% on June and the highest figure since August last year. Remortgaging also remained strong during July at ?10.7bn - the second highest monthly figure ever.

Michael Coogan, CML director general, said: "July's figures support the picture of a housing market that remains stronger than expected. The apparent increase in first-time buyers in July is welcome, as their numbers have been seriously depleted in recent months."

However, the CML warned that buyers were borrowing much more against their income than they were a year ago. While this is offset at present by the UK's current historically low interest rates, the cost of borrowing is expected to rise next year, meaning borrowers could be storing up trouble for the future.

Mr Coogan said the group did not anticipate any shocks to the market that would cause a serious problem, but added that the current buoyant situation was unlikely to continue. "We continue to expect house price inflation to slow down looking ahead into next year," he said. "The risks of a correction have not gone away and borrowers should remain wary of over-committing themselves."

The CML's figures were backed up by those from the British Bankers' Association which showed net mortgage lending (which takes into account redemptions and repayments) rising
by ?5.52bn during July, up from ?4.96bn the previous month.

Credit card lending also bounced back in July, jumping by ?396m following a more subdued increase of ?208m during June. However, borrowing through loans and overdrafts rose by just ?313m, following a strong rise of ?568m the month before.

The Building Societies Association said total mortgage advances by its members reached ?4.24bn during July, the highest figure since August 1988, but net advances fell slightly
month-on-month to ?1.58bn from ?1.7bn in June.