Mortgage lending up again as housing market soars

UK MORTGAGE lending increased by a record pounds 6.4bn in April, according to the British Bankers' Association, as the runaway growth in the housing market continued to show no sign of abating.

The increase in lending was more than 14 per cent higher than the average monthly increase of pounds 5.6bn over the past six months, and almost 7 per cent higher than last month's increase of pounds 6bn.

Growth in unsecured lending, however, through personal loans and credit card borrowing, slowed to pounds 1bn, down from an increase of pounds 1.4bn the previous month. The slowdown in unsecured lending was accounted for by falling demand for personal loans. However, growth in the credit card market continued to accelerate.

David Dooks, the BBA's director of statistics, said: "Mortgage demand continues to be a significant component of the banks' lending. April's lending was expected to remain buoyant because of the higher volumes of approvals granted in recent months and the resulting growth was above trend. Consumer credit overall was weaker than in the previous month, with subdued personal loan demand partly offsetting higher card borrowing."

In spite of the continued in crease in mortgage lending, the proportion accounted for by first time buyers fell to just 28 per cent, from 31 per cent last month, according to the Council of Mortgage Lenders. The proportion of those remortgaging also fell - to its lowest level for 18 months. Michael Coogan, the CML's director general, said the statistics showed the first signs of an end to the recent rapid growth in remortgaging that started in the late 1990s.

"Given that there is some relationship between remortgaging and mortgage equity withdrawal, this may suggest that the consumer appetite for borrowing against housing equity could at last be showing early signs of flagging. If so, then this would be a helpful pointer towards the likelihood of a soft landing for the housing market," he said.

The Liberal Democrats said the figures confirmed its fears that recent interest rate rises have had no effect on curbing increasing consumer debt. Vince Cable MP, the Liberal Democrats shadow chancellor, said Britons now owe more than pounds 1,000 bn collectively.

"Today debt topped a pounds 1 trillion, yet there is more evidence of a boom in lending," he said. "This rise in lending by banks and building societies is recklessly fuelling the housing boom. If interest rates rise and house prices fall many people could find themselves in serious difficulty. It is time for the Government to take action to protect ordinary homeowners against irresponsible lending."

The new figures came as the Conservative Party unveiled plans to set up a taskforce into spiralling debt levels in the UK, headed by Lord Griffiths of Fforestfach, a former director of the Bank of England and the current vice-chairman of Goldman Sachs International. Other members of the taskforce will include Manish Chande of Mountgrange Capital, Professor Iwan Davies of Sawnsea University and James Jones, the Bishop of Liverpool.

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