Mortgage bonanza's last hurrah

MORTGAGE lending hit an all-time high last month in what the City believes was a last hurrah for the property boom. Total lending in July reached £ 29.2bn, overtaking the £28.2bn record set in June.

There was a rise in loans specifically for house purchase, which reached an all-time high of £14.7bn as 131,000 loans for purchase went through - the highest monthly figure for almost two years.

The figures relate to sales agreed in the spring, when the housing market was still seeing strong price rises. Since then, the Bank of England has continued to push up interest rates - by 1.25% since November - and its governor, Mervyn King, has warned of a slump in the market.

Estate agents report that the heat has come out of the market recently, with asking prices being cut dramatically in some areas.

Michael Coogan, director general of the Council of Mortgage Lenders, which published yesterday's figures, said they 'clearly do show that there was a strong seasonal revival in the house purchase market this spring.'

He added: 'Estate agents are continuing to report a slowdown in current activity in their offices but this will not be reflected in lending figures for a few months.'

Miles Shipside, commercial director at the property website Rightmove, said: 'The Bank can't raise the cost of borrowing five times in nine months without something happening.

'While it took much longer than people expected, it is now hitting the housing market at the sharp end and asking prices have been declining in each of the last five weeks. Sellers are having to accept that the market has turned and that realism is the order of the day in setting their prices.'

Mr Coogan said fears about future increases in interest rates have seen more buyers opting for the security of a fixed-rate mortgage. Some 38% of new loans were on this basis, up 10% on the start of the year.

Remortgaging remained strong during July, with £11.3m advanced - the highest figure since last October. Another £1.8bn was released through equity release schemes.

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