Significant increase in UK mortgage lending

Mortgage lending in the UK jumped by 26% during July as the housing market showed further signs of improving, figures showed today.

Around £16bn (€18.6bn) was advanced during the month, the highest figure for nine months and up from £12.7bn (€14.75bn) in June, according to the Council of Mortgage Lenders.

The group said the increase was further evidence of a modest improvement in the market after an exceptionally weak winter.

However, it cautioned that activity still remained subdued by historic standards, with lending last month the lowest for July since 2001 and well down on the average of £27bn (€31.3bn) seen during the past seven years.

The CML said lending volumes had picked up in June and July as it had anticipated, due to the typically strong seasonal rise in activity over the summer.

It said the increase was likely to have been driven by a rise in people buying homes, as remortgaging activity continued to be limited by the low reversion rates people were put on to when their existing mortgage deal came to an end.

Paul Samter, CML economist, said: "Most of the indices point to house prices rising modestly over the summer months. The CML's July gross lending estimate of £16bn (€18.5bn) is the highest level in nine months and consistent with the rise in house purchase approvals.

"But the bounce-back in activity from the extreme weakness around the turn of the year, coinciding with a seasonal bounce, is limited in how far it can go against the current back-drop.

"We expect improved sentiment to support the market, but a further significant pick-up is unlikely with so many obstacles in place."

As a result, he said the group expected a slowdown in both lending volumes and property transactions during the latter part of the year, as a slow but more stable market emerged.