September mortgage lending figures may have dropped in comparison with August’s record figures, but the industry remains optimistic for the future of the market.
According to data from the Council of Mortgage Lenders (CML), September’s gross mortgage lending hit £29.5 billion.
Despite being down 11 per cent on August’s record of £33 billion, lending was up by 7 per cent on September last year (£27.6 billion).
Calm after the storm
The CML reports that it is common to see slow lending in September before picking up later in the Autumn. Typically, consumers tend to borrow less as the Summer holidays come to an end, but will start house hunting more over this period.
David Dooks, director of statistics at the British Bankers’ Association (BBA), confirms that it is not unusual for an above-trend net mortgage lending figure to be followed by a below-trend figure, as seen with September and August.
He said: “Neither figure should be viewed as a sign of structural changes in demand; the underlying movements have been stable recently, increasing by around £5.6bn a month for the last five months.”
CML director-general, Michael Coogan, explains that housing demand and mortgage approvals in May and June this year were particularly strong and supported the record levels of lending seen during the Summer months, August in particular.
Coogan comments: “The lower levels of mortgage lending in September must be seen against this backdrop. House price growth and mortgage approvals continue to remain strong, so we should expect to see continued levels of robust lending over the coming months.”
Rate threat
Although industry insiders believe August’s rate increase had little effect on lending figures so far, Coogan explains that as we move into 2007, there may be a slowdown in house sales and mortgage approvals, with financial markets now expecting a further interest rate rise.
Adrian Coles, director-general at the Building Societies’ Association (BSA) says: “Despite August’s interest rate rise, September was another strong month, with gross advances being the highest September figures on record. On a seasonally adjusted basis, mortgage approvals were also the highest September figures on record.
The seasonally adjusted approvals figure is, however, slightly down, by 6.2 per cent, on the record figure in August, suggesting that the market may be slowing slightly. Even so, the approvals figure is still strong, suggesting that high demand will continue in the short-term.”
To avoid pressure on consumers to meet their mortgage payments, the BSA is urging borrowers to consider the impact of higher interest rates on their mortgage and ensure that they will still be able to afford the monthly payments. The BSA advises that borrowers look into products such as fixed rates that will provide them with certainty over future repayment levels.
Consumer debt
Despite industry concern over mortgage repayments, on a more positive note the BBA revealed figures that suggest consumers are being more pro- active in managing their debt.
Unsecured personal lending was marginally down in September. However, while credit card borrowing fell by £0.1bn, loans and overdrafts rose by £0.1bn.
Dooks commented: “This year’s noticeable weakness in consumer credit continued in September with a negligible rise in personal loans and overdrafts while credit card lending declined again. So far this year, borrowing on credit cards issued by the major banks has contracted substantially, by £1.4bn.”
Figuring out the figures
The industry consensus is that September’s figures demonstrated a successful month and the mortgage world can celebrate that. As for rate rises, we can only wait and see if and when they happen.
Andy Pratt, chief operations officer at Alexander Hall, comments: “There is always a lag in the figures. August’s lending figures come from the large number of deals done back in the Spring. There may be a slowdown in the market in the coming months, but despite all indications that there will be a another rate rise, there is a possibility it may not even happen, with the Bank of England waiting to see what will naturally occur in the market. If not I suspect we will not see a further rate increase until January next year.”
As more people strive to get onto the property ladder and the buy-to-let market continues to boom, the mortgage world can hope for record upon record of mortgage lending. September’s figures may be down on August’s, but this is largely seasonable. As long as borrowers are advised to be wary and lenders continue to provide suitable and innovative products, Bank Base Rate movements should hopefully not have too dramatic an effect.
