Mortgage lending looks set to remain strong for the rest of the year as people re-mortgage to take advantage of historically low rates, a banking group said today.
The British Bankers’ Association (BBA) said that just half of all loans approved during September were for house purchase, compared with about 68% in September 1999.
The group said the shift to re-mortgaging was part of an on-going trend as people made the most of the increasingly competitive rates on offer.
But it added that it might also indicate that consumers were unwilling to pay the current high property prices, and were opting to stay put and build extensions to their homes instead.
During September, 212,600 loans were approved with a total value of £13.81bn, 3% more than than during August.
Of this, £5.45bn was for re-mortgaging, £1.42bn for equity release, and £6.94bn for house purchase.
Re-mortgaging was up 73% by value on the figure for September 2001, while loans for house purchase increased by just 22%.
The average value of a loan for buying a house also fell for the third consecutive month during September, to reach £86,900.
BBA executive director Simon Pitkeathley said: “Only half the amount of loans approved in September were for house purchase.
“This is a continuation of a trend we have seen for some time now. It would seem that increasing numbers of home-owners are seeking out better deals on their existing loans.
“They may also be choosing to ‘build that extension’ rather than move to a bigger property.”
Total mortgage lending of £13.13bn during September was 8% lower than August’s figure, but 34% up on the same month the previous year.
Once repayments were taken into account the underlying rise of £4.8bn was the second highest ever, and only slightly below May’s record of £5.17bn.
Unsecured lending increased by £1.1bn during September, boosted by increased demand for loans and overdrafts, as well as strong credit card borrowing.
Spending on plastic totalled £5.96bn last month, and despite strong repayments, outstanding debt still rose by £313m, well above the recent average of £250m.
Consumers now owe a total of £25.56bn on their credit cards.
New lending on loans and overdrafts totalled £3.67bn during the month, and after repayments are taken into account net lending rose by £826m, well up on the recent average of £690m.
Pitkeathley said: “Continued credit card borrowing and loan demand for new cars contributed to the increase in other consumer lending.
“As repayments remain robust, there is every indication that consumers are in control of their finances.”
EGi News 25/10/02
