Mortgage lending hits highest September figure since credit crunch

Gross mortgage lending fell by 7% in September to £20.5bn but was the highest September figure since before the financial crisis of 2008, according to the latest data released by The Council of Mortgage Lenders (CML).

Mortgage lending dipped from August’s figure of £22.1bn but was higher than in the same period last year when a total of £20.1bn was lent and is the highest September figure since 2007 when gross lending reached £29.9bn.

On a quarterly basis, gross mortgage lending reached £63.6bn for the third quarter of 2016, 11% higher than for the second quarter and 4% higher than for the same period in 2015.

CML senior economist Mohammad Jamei said: “Remortgage activity looks set to grow, helped by attractively priced mortgage deals encouraging borrowers to refinance. Prospects for house purchase activity continue to look slightly subdued, when compared to the same period a year ago.

“Despite this, housing market sentiment continued to improve in September, after recovering in August. As a result, we expect a modest rise in approvals, though at levels lower than seen earlier this year, as the lack of properties on the market for sale and affordability constraints continue to bear down on borrowers.”

The latest data allays fears that mortgage lending would slip after the UK voted to leave the EU in June 2016. However, the growth in mortgage lending is largely fuelled by re-mortgaging as existing homeowners take advantage of competitive deals with low interest rates after the Bank of England cut interest rates to a record low of 0.25% in August.

The rate of house price growth has slowed, partly due to changes in Stamp Duty and concerns over the impact of Brexit but The Office for National Statistics (ONS) said the average UK house price rose 8.4% over the year to August, reaching £219,000.

Henry Woodcock, principal mortgage consultant at IRESS, said: “The gross lending trend since the summer has been in an upward trajectory, so I’m surprised the market has stumbled, with gross lending down 7% to £20.5 billion from August.

“There was a 7% rise in gross lending in August, but the month saw a drop in approvals which has followed through into September, effectively wiping out that gain. However, I think this is just a blip.”

Howard Archer, Chief UK Economist at forecasters IHS Global expects house prices to remain stable in the final few months of 2016 citing the CML’s comment that “prospects for house purchase activity continue to look slightly subdued, when compared to the same period a year ago.”

Looking ahead to 2017, Archer said: We believe housing market activity is likely to be increasingly pressurized in 2017 by heightened uncertainty constraining consumer confidence and willingness to engage in major transactions, as well as hampering economic activity. We suspect that house prices will dip modestly in 2017, possibly by around 3%.”