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UK Mortgage Lending Hits New High

Who says increases in base rate are bad for home mortgage loans? Not according to the recent figures announced by the Council of Mortgage Lenders (CML), which show an overall increase in home mortgage lending in the UK year-on-year of 21% and 7% month-on-month from July. Clearly the UK home mortgage market is vibrant and healthy.

A second look at UK borrowing figures announced by the British Bankers Association (BBA), however, cast a slight shadow over these figures. Overall credit card debt in the UK drop as massive £339 million, making last month the fourth month in a row that UK credit card borrowing dropped. And while UK personal loans and overdrafts increased, the increase was well below market expectation at a mere £186 million.

So, while it may at first glance seem that demand for housing loans in the UK shows a continued strong UK housing market, a closer look at the numbers certainly seems to indicate that UK homeowners are concerned with the recent trend in increased interest rates in the UK and have decided to move out of high interest short term debt by paying off their UK credit card debt and overdrafts by re-mortgaging their homes.

Nonetheless, the recent increase in base rate by the Bank of England does seem to have been shrugged off by UK home buyers. A buoyant housing market, especially in the capital, does appear to still exist. All of which make the CML’s comments that “In the coming months we expect to see a very similar picture, as demand remains strong and house prices continue to rise” look promising for existing UK homeowners. Niggling at the back of the mind, however, are the words of David Dooks, director of statistics at the BBA, whose comments on the recently announced UK borrowing figures were that “We [BBA] have not seen contraction of borrowing on cards on this scale before”.

As such, the UK home mortgage loan market appears to be showing clear indications of moving in two distinct directions. On the one hand there are clear moves to re-mortgage homes in the UK to pay off existing unsecured debt at high interest rates. On the hand there appears to remain a strong and vibrant UK housing market. Which begs the question: how much longer can things go on this way?

With financial markets expecting to see an further increase rates sometime in the next six months, this is anyone’s guess. However, Michael Coogan, of the CML, clearly feel confident about the future commenting that “despite today’s figure being the tenth monthly lending records of the past year, this level of lending is sustainable and illustrates the market is in fundamentally robust shape”.

Richard Smith
14th September 2006

More Information:

  • Don’t Forget The Extra Hidden Costs Of Getting A UK Mortgage
    For most of us, buying a new home is both one of the most exciting and stressful times of our lives. It goes without saying then that this is not a particularly good time to find out that you may be facing a bill of thousands of pounds in extra hidden costs for getting the mortgage to buy the UK property.
  • The True Cost Of Your Mortgage
    It’s easy to say “go and research the market place to find the cheapest mortgage”, but is it that easy to actually do it and how do you know that you have really got the best mortgage deal when you’ve finished?


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