Mortgage lending hits May high

Mortgage lending hits May high

A total of £28.7bn was lent to buyers and remortgagors last month, one of the highest figures since records began in 1995, the Council of Mortgage Lenders (CML) said.

The total was 30% higher than in May last year and 18% higher than the previous month's figure.

The spring months traditionally see a pick up in the property market, but the CML's director general, Michael Coogan, said the figure was still impressive.

"Lending has hit record levels in six of the last eight months, supported by the strength of the London market, interest in higher priced properties and strong consumer confidence," he said.

Mr Coogan added that he expected demand to moderate later in the year, but that on the whole the market would remain robust.

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May record

The British Bankers' Association (BBA) also released its lending figures today, showing a £5.7bn rise in mortgage lending in May, the largest jump since 2004.

David Dooks, the BBA's director of statistics, said: "May's rise in net mortgage lending, the largest monthly increase since the rise of £6bn in April two years ago, shows the mortgage market to be very much alive at a time when house price growth is strengthening."

The Building Societies Association (BSA) said it had seen a rise in mortgage activity in May, with members paying out a total of £4.6bn, compared with £3.5bn in the same month last year.

This is the highest figure for May lending since the BSA's records began in 1987.

On top of this, the group said lenders had approved almost £5.5m worth of loans during the month, compared with £3.8m last year.

The BBA said the amount advanced in unsecured loans rose by £0.4bn, higher than the average of £0.3bn seen in the last six months, while borrowing on credit cards fell by £0.3bn.

Mini-boom

Howard Archer, chief economist at investment firm Global Insight, said: "Very robust mortgage lending and approvals in May indicate that reports of the death of the "mini boom" in the housing market are premature."

"This suggests that house prices will see further strength in the near term at least after showing recent tentative signs of coming off the boil."

However, Mr Archer said he was doubtful house price would continue to increase.

"Despite high employment and a modestly improving economy, we suspect that buyer activity will be increasingly squeezed over the coming months if house prices continue to move up significantly, and that this in turn will cap prices over the longer term."

He said modest earnings growth compared with house price inflation, combined with markedly increased utility bills, had already taken their toll on people's ability to afford to buy property.

"House buyers will be concerned by the very real possibility that interest rates could increase before the end of the year, as this would further stretch affordability," he added.