October mortgage take-up hit new heights

Mortgage lending strengthened in October, buoyed by increasing consumer confidence in the housing market, according to the Bank of England today.

Figures from the Bank showed that advances during the month rose by £7.6bn to a total of £26.84bn.

At the same time the value of home loans approved but not yet paid out rose to £27.46bn, a level not seen since September 2003, when annual house price inflation was running at around 18%.

The growth was driven by a jump in the number of mortgages approved for people buying a new property, which rose to 113,000 during the month, well up on the previous six-month average of 100,000 and the highest figure for 18 months.

The increase corresponds with reports from Nationwide that house prices jumped 1.3% in October, their biggest rise in 15 months.

But the number of people looking to remortgage fell slightly during the month, with 111,000 new loans approved, down from 113,000 in September, but still ahead of the recent average of 104,000.

Howard Archer, chief UK economist at consultancy Global Insight, said the Bank's figures provided further evidence that the housing market was currently "relatively healthy".

"This ties in with survey evidence from the Royal Institute of Chartered Surveyors, Rightmove and Hometrack showing that buyer interest is picking up, helped by August's cut in interest rates," he said.

Total lending to individuals, including consumer borrowing on credit cards and loans as well as mortgages, increased by £8.9bn - a larger jump than in September and above the previous six-month average.

Credit card lending was £0.2bn higher than in September, while borrowing on other loans and advances was slightly lower.

The appetite for consumer credit continued to wane, with the annual rate of growth down from 12.1% in July to 10.5%. Outstanding debt on credit cards was £617m, down from last October's figure of £799m.

Consumer credit growth was again relatively muted in October, suggesting that consumers continue to be relatively cautious in their borrowing," said Mr Archer.

"This reinforces the view that, while consumer spending has picked up modestly from the lows seen earlier this year, it is likely to remain relatively subdued for some time to come.

"Record high debt levels and rising unemployment means that there is an increased need for many consumers to try and repair their balance sheets, or at the very least limit their new borrowing"