Mortgage lending recovers in September

September was one of the busiest months on record for mortgage lenders, with the total amount advanced to borrowers reaching its highest level since July 2004, new figures showed today.

Gross mortgage lending increased 4.3% over the month, to an estimated £28.1bn according to the Council of Mortgage Lenders (CML).

This figure is 11% up on September 2004, and is the highest figure recorded by the CML since last July.

The organisation said mortgage lending had been boosted by high levels of remortgaging as people switched deals to take advantage of the lower interest rates on offer.

The CML's director general, Michael, Coogan said the figures were evidence that the housing market was in good health, and that households were not lacking the confidence to take on new borrowing.

"While expectations of lower interest rates have undoubtedly helped to trigger the recent resurgence in lending, we believe the Bank of England's monetary policy committee will put off cutting rates further until it is clear that inflationary pressures are easing," he said.

"We would correspondingly expect lending activity to level off over the coming months."

The Building Societies Association (BSA) said its members had seen a small rise in gross lending by its members over the year, from £4bn in September 2004 to £4.1bn this September.

When repayments were taken into account, total lending was down on last year, from £1.4bn to £1.2bn, however the value of loans agreed but not yet paid out was considerably higher.

Last September building societies approved £2.8bn worth of mortgages, in the same month this year they approved £4bn of home loans.

The banks said they had seen an increase in net mortgage lending, with the British Bankers' Association reporting a £5bn increase over the month, compared with a £4.4bn rise in August.

In contrast, unsecured lending through loans, credit cards and overdrafts weakened, growing by less than it did in August.

New borrowing on credit cards was up £0.1bn, while the value of new loans and overdrafts taken over the month was £0.4bn.

Howard Archer, chief UK economist at consultancy Global Insight, said the muted unsecured lending pointed to continuing consumer caution.

"This reinforces our belief that consumer spending will remain subdued for some time to come despite September's pick-up in retail sales," he said.