Mortgage lending rises by record amount

Mortgage lending increased by its highest ever margin during April, as consumers made the most of low interest rates, it was revealed today.

The British Bankers' Association said that unusually low interest rates and a competitive mortgage market, combined with the housing boom, was driving the rise in borrowing.

During April total new mortgage lending reached ?11.46bn, 5% higher than March's figures, and 47% higher than lending in April 2001.

Once repayments and redemptions were taken into account, net lending reached a record ?4.15bn, taking outstanding mortgage debt to ?393.68bn.

The group also reported a seasonal upturn in loan approvals during April, with 232,800 new mortgages worth ?14.79bn approved by banks, 31% higher by number and 45% higher by value than a year earlier.

The jump in approvals, which is the highest recorded, was down to strong levels of loan approvals for house purchase, which at ?8.62bn were 41% higher in value than during the previous April.

There was also strong demand for remortgaging, with loan approvals in this area worth 48% more than a year ago at ?4.75bn, while the value of mortgage approvals for equity release was 71% higher at ?1.42bn.

BBA executive director Simon Pitkeathley said: "The third record increase in net mortgage lending in the last four months says everything about the current strength of the mortgage market.

"While interest rates remain at current levels and lenders compete for market share, borrowers are quick to see the potential for cheaper, affordable loans.

"As a consequence, house purchase loans are, on average, 14% higher than a year ago." The BBA said that unsecured lending was also slightly stronger in April, boosted by higher credit card borrowing.

Credit card spending totalled ?6.38bn during the month, only slightly below December's record of ?6.4bn. But repayments remained strong, leading to seasonally adjusted net lending rising by ?302m, compared to ?228m in March.

Mr Pitkeathley said: "In the credit card market people appear content to carry debt on their cards, often on special rate deals or balance transfer rates, and especially at times of higher retail spending like Christmas and Easter."

There was also strong demand for new personal loans, with total lending through unsecured loans and overdrafts reaching ?3.91bn.

But this was offset by higher repayments, suggesting consumers were consolidating their debts, and net lending rose by ?682m.