23rd September 2014
New mortgage lending rose by 15 per cent to £11.1 billion in August compared to a year earlier in a sign that the market is beginning to moderate and show slower rates of annual growth.
The figures from the British Bankers’ Association also reveal that approvals for home purchases rose by 6 per cent in the year to August, but remortgaging and equity release volumes were lower than a year ago.
Despite the introduction of a higher, £15,000 Isa limit in July, savers have invested less so far this year than they did last year.
July saw £4.9 billion invested and there was a further £1.5 billion in August. However, total deposits in the year-to-date were just £9.3 billion, which was below the £11 billion in the equivalent period of 2013.
David Dooks, statistics director at the BBA, says: “When customers feel more optimistic about the economic outlook they are much more likely to take on new borrowing.
“Today’s figures show that mortgage lending in August was up 15 per cent on last year and that credit card spending remains robust. But I was particularly struck that after years of decline, demand for unsecured personal loans is rising quite strongly again.
“Those products are often used to finance bigger purchases such as cars or major home improvements – the sort of spending we often put off until we feel confident about our financial circumstances.”
Howard Archer, chief UK and European economist at IHS Global Insight, agrees that data reinforce the impression that housing market activity is seeing a loss of momentum.
He says: “There are also signs in the latest survey evidence that buyer interest has come off its early-2014 highs.”
He believes that house prices will rise at a more restrained rate over the coming months as affordability is stretched, there is the prospect of interest rates will starting to rise before long and tougher checks on borrowers all having a limiting effect on buyer interest.
Despite this he says the economy is holding up well employment high and rising, consumer confidence elevated and earnings growth likely to improve in 2015.
Add this to the fact that housing supply still tight in a number of areas, he says that “house price growth seems unlikely to fall away”.
IHS forecasts house prices will increase by around 1.5-2 per cent over the final four months of 2014. and by 6 per cent in 2015.
Brian Murphy, head of lending at Mortgage Advice Bureau, the broker, says: “While the remortgage market has not yet seen the same level of recovery as purchase loans – with overall remortgaging levels down on last year – we can expect to see activity increase as interest rate rises edge closer, making locking into a low rate deal at the top of consumers’ priorities.
“Although as many as three million consumers have been unable to remortgage due to low equity or worsened financial circumstances, rising house prices and improved employment prospects should also return many of these ‘silent prisoners’ back to the remortgage market.”