Mortgage Lending At Highest for 28-Months

The Bank of England has revealed that new mortgage lending in March was higher than it has been for 28 months.

The Bank said that net mortgage lending rose to £9.3bn in March, with the market not seeing this amount of money being loaned to homeowners since November 2003 when the Bank had just embarked on a series of rate hikes.

The rise in mortgage lending is further evidence that the housing market has stepped up a gear, fuelling speculation that the next movement in interest rates will be up.

However, it was a cut in interest rates in August 2003 that sparked some life into the housing market leading policymakers to fear that further lowering borrowing cost could prove damaging.

As a result, the Bank of England is now expected to leave interest rates at their current level of 4.5 per cent.

These figures allied to the Halifax’s announcement that house prices rose 2 per cent in April, have led analysts to conclude that optimism in the strength of the UK housing market is justified.

“ Approvals, which are an indicator of housing market demand, are up 27.5 per cent from the same period last year, and have stayed above their long-run average level of around 100,000,” said David Stubbs, economist with the Royal Institution of Chartered Surveyors (Rics).

“ The Mortgage figures point to firm housing market conditions, and are backed up by evidence from Rics estate agents who report that enquiries from would-be buyers rose fro a tenth consecutive month in March as well,” added Mr Stubbs.

However, whilst the mortgage industry enjoyed some good news, the news wasn’t so good for the unsecured lending market in the UK with borrowing on unsecured personal loans, overdrafts and credit cards down to a 12-year low.

Howard Archer, chief UK economist with the Global Insight consultancy, said: “ Very limited consumer credit in March indicates that consumers are still pretty keen to limit their use of credit cards, and find less expensive ways of financing their spending.

“ Record high debt levels, rising unemployment and increasing pension concerns means that there is an increased need for many consumers to try and improve their balance sheets.”

Cindy Kuo
5/5/06