Rate cuts spark home loans boom

Mortgage lending hit a three-month high in November as homebuyers took advantage of the cheapest borrowing rates since the early 1960s, new figures revealed yesterday.

Lending totalled £10.8bn in the month, according to the British Bankers Association, a 2% increase on October's level.

The housing market appears to have ended the year on a strong note, defying predictions that rising unemployment and the global downturn would drag it down.

"Loan approvals continue to hold up, suggesting that the mortgage market may be more resilient than in past years," said Ian Mullen, the chief executive of the BBA.

Borrowing on credit cards and personal loans was also robust, rising by more than £1bn, compared with a £708m increase in October.

Consumers appear to have shrugged off the torrent of bad economic news throughout the autumn, cheered by falling borrowing costs. In November, the Bank of England cut base rates to their lowest level since 1963.

"Households are both taking advantage of current cheap loan deals and probably con tinuing to withdraw equity from housing," said George Buckley, UK economist at Deutsche Bank.

Confirming that confidence is bearing up, a separate survey showed that UK consumers are more optimistic about the economic outlook than either German or French consumers.

Nearly two-thirds of people living in Britain are optimistic that the economy will improve during the next 12 months, compared to 57% of people in France and 58% in Germany, according to research by the Halifax.

Spokesman Mark Hemingway said: "Even though the UK will not be part of the eurozone, it is the British who are the most optimistic about general economic improvements during 2002."

British consumers were more likely to say they would be increasing borrowing in 2002, with 51% expecting to rack up more debts, compared to 30% of Germans.

British households are also more likely than their continental counterparts to expect interest rates to rise again from their current lows, however, with 45% expecting increases, compared with 35% in France. In Germany, 41% think they will stay the same.