Record rise in mortgage lending

MORTGAGE lending by major UK banks rose by a record £6.4bn in June, according to revised figures from the British Bankers Association.

The numbers compared with just a £4.9bn increase the month before and an average rise of £5.6bn over the past six months.

Mortgage approvals, an indication of future lending, rose 4%in June to £18.9bn. The average mortgage also rose sharply, to £118,100 from £115,400 in May.

Gross mortgage lending totalled £18bn in June, compared with £15.5bn in May, and showing 20% growth on June 2003.

The figures also revealed continuing demand to remortgage to raise money rather than to buy another property. The value of mortgages used for buying homes was 57%, down from 67% a month before.

Today's data adds further information and revised numbers to the initial BBA release a week ago. The ealier numbers reported a lending rise of £6.5bn, up from £5.1bn in May.

BBA director of statistics David Dooks said the rise in net lending over the second quarter was 'virtually the same as the first', showing that 'the buoyant trend in mortgage lending has remained fairly stable over the first-half of the year'.

However, he added that future demand is 'difficult to read'.

'Approval numbers show remortgaging and equity withdrawal loans are running below last year's comparative months, whereas loans for house purchases have been consistently higher, despite rising property prices,' he said.

The ongoing boom will add weight to the chances of a rise in interest rates next week. The Bank of England has raised the base rate four times since November and is widely expected to announce an incerase from 4.5% to 4.75% after its next monetary policy committee meeting.

Personal lending in June was slightly stronger than May, rising to a seasonally adjusted £1.1bn. Credit card lending repeated May's rise, increasing by £450m, but demand for personal loans and overdrafts was slightly stronger than the 'modest growth' seen in April and May at £700m, the BBA said.

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