September boom in mortgage lending

The housing market showed further signs of picking up today, as figures revealed the number of mortgages approved for people buying a new home reached a 15-month high in September.

About 107,000 loans were approved for house purchase during the month, the highest figure since June last year, and well up on the 86,000 approved during September 2004, according to the Bank of England.

The value of all mortgage approvals, including those for people remortgaging or releasing equity from their property, also soared to £27.04bn - a level not seen since November 2003 when the property market was still strong.

The figures add to growing evidence that the housing market has turned a corner following August's cut in interest rates.

Britain's biggest mortgage lender, Halifax, reported a 1.2% rise in property prices during September, while research by the Royal Institution of Chartered Surveyors (Rics) found its members expected prices to rise for the first time in 18 months following increased demand from potential buyers.

During September, total mortgage advances reached £24.71bn, the highest figure for just over a year.

Once redemptions and repayments were taken into account, total outstanding mortgage debt rose by £7.7bn, slightly stronger than the average seen during the previous six months.

Jonathan Said, an economist at the Centre for Economics and Business Research, said: "This adds credence to the notion that the housing market has stabilised, with lower interest rate expectations one month ago keeping potential housebuyers plentiful."

The rate at which consumers borrowed money through credit cards, overdrafts and loans eased slightly during September to £17.79bn, with credit card lending also slightly weaker than during the previous month.

Once repayments were taken into account, total outstanding unsecured debt rose by £1.25bn, which was broadly in line with the average over the previous six months.

Mr Said said: "This flatness in consumer credit is indicative of the sluggish retail market, however it suggests that consumers have not cut back strongly on their borrowing habits.

"Although today's news will not spark a return to the Bank of England's consumer debt worries that were very topical one year ago, the Monetary Policy Committee will be taking this into account.

"If inflation were to drive the MPC toward a rate hike next year, it will not need to worry about collapsing consumer borrowing, particularly in the housing market."