Mortgage lending jumps in August

http://news.bbc.co.uk/go/rss/-/1/hi/business/5362908.stm

Version 0 of 1.

Mortgage lending is still booming, according to figures published by the Council of Mortgage Lenders (CML).

In August, total new lending hit a fresh record of £32.7bn, 7% up on July and 21% higher than a year ago.

The British Bankers Association (BBA) also reported a record £6.2bn rise in net mortgage lending, which reflects the impact of repayments by borrowers.

At the same time, consumers seem to be using credit cards less, with card lending down £399m in August.

August was the fourth month in a row that UK consumers had registered a net repayment on their credit cards.

"We have not seen contraction of borrowing on cards on this scale before," said David Dooks, director of statistics at the BBA.

Mr Dooks explained that the drop may be due to increased competition as foreign card issuers enter the UK market, and may signal that consumers are becoming more careful in managing their finances.

The BBA figures also showed that personal loan lending and overdrafts increased by £186m in August, a weaker than usual rise.

House market

Wednesday's mortgage announcement seems to underpin recent data from major lenders and from the Bank of England, suggesting that the UK housing market is strong despite a recent rise in interest rates.

"In the coming months we expect to see a very similar picture, as demand remains strong and house prices continue to rise," said Michael Coogan of the CML.

However, he warned that financial markets are expecting an increase in interest rates sometime between now and the middle of next year, a move that is likely to cool house price growth.

"We forecast that house price growth and strength of demand will moderate as consumers anticipate higher rates," Mr Coogan said.

According to the Halifax and Nationwide, house prices are now between 7% and 8% higher than a year ago.

And the Bank of England last month reported that mortgage approvals, a very good indicator of near term trends, were at their highest level of the year so far and 24% higher than at the same time a year earlier.