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Mortgage lending remains buoyant despite summer dip

The housing market slowed a touch in August, but avid buyers and enthusiastic banks will keep lending growing this year. Mortgage lending dipped in August in the traditional summer lull in the market, but borrowing levels are still firmly above where they stood a year ago, industry figures show.

Lending in August hit £19.7bn, down 9pc compared with July but up 10.7pc on August 2014, according to the Council of Mortgage Lenders.

First-time buyers made up £4.2bn of that, up 5pc year-on-year, while home-movers borrowed £7.1bn, an increase of 8pc compared with the year before. Owner-occupiers also borrowed £4.2bn by remortgaging, up 20pc, as they scrambled to lock in low interest rates before the Bank of England moves to increase rates.

Meanwhile 17pc of transactions in August were buy-to-let purchases, up from 13pc a year earlier.

Officials at the Bank of England are increasingly worried about the buy-to-let market, fearing that a rise in interest rates or a fall in house prices could prompt landlords to sell up, pushing house prices further down in turn.

CML data showed that landlords borrowed £1.4bn to buy properties, up 40pc year-on-year, and took £1.9bn in remortgaging deals, up 73pc

Mortgages are increasingly widely available, according to separate data from Bank of England.

Its survey of banks found that lenders were more open to applications for loans at both high and low loan-to-value ratios. Banks also expected to become more generous with credit.

The number of banks reporting that they were open to giving 90pc loans outweighed the proportion saying they were less willing to do so by a margin of 1.8pc in the past three months. And a net balance of 10.3pc said they would be more willing to give out 90pc loans in the next three months.

Demand for loans was growing strongly, the banks said, while default rates continued to fall rapidly as the economy improved and low rates kept households’ debt repayments down.

While lenders are becoming freer with credit, house prices are still rising sharply, particularly for first-time buyers. “We expect house prices to rise 7pc in 2015 and then by 6pc in 2016,” said Howard Archer, chief economist at IHS Global Insight.

“Housing market activity will likely be supported by largely helpful fundamentals, notably stronger earnings growth, high employment, elevated consumer confidence and still very low mortgage interest rates. A strengthening buy-to-let sector is also supportive to higher house prices.”  He added that the limited supply of properties onto the market was also pushing prices up.

Despite the sustained rise in sales, transaction volumes have still only reached 60pc of their pre-crash levels.