New low for loan interest

UK mortgage lending enjoyed a record rise earlier this year as better access to loans and ultra-low interest rates helped the housing market revival gather pace.

The typical interest rate taken out by borrowers on new home loans dropped in the second quarter to a new low of 3.47%, figures released by the Bank of England and the Financial Conduct Authority (FCA) show. They also reveal that the total value of new mortgages advanced rose by nearly one-quarter (23%) on the first three months of this year to reach £41.6billion in the quarter.

While it is usual to see mortgage lending increase as the spring months move into early summer, this is the biggest percentage jump seen for that time of year since records began in 2007, the report says.

The findings are from a survey of around 300mortgage lenders and administrators from across the UK.

In a sign of what is to come, lenders reported they had already approved £47.5billion-worth of loans for people buying homes or re-mortgaging in the coming months, marking the highest quarterly figure seen since autumn 2008. A string of reports in recent months have reported a burst of activity returning to the housing market following the launch of UK Government schemes such as Funding for Lending, which have prompted much wider mortgage availability as well as a price war among lenders.

Some experts have raised concerns that the initiatives could eventually lead to a house price bubble, with borrowers overstretching themselves.

One in 40 (2.5%) mortgages advanced in the second quarter were to people

“Growing confidence is also stoking the market”

with deposits of less than 10%, compared with one in 48 (2.1%) a year ago.

The value of loans handed out to first-time buyers has risen by nearly one-third (31%) over the past year, to reach £8billion in the second quarter.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said cheaper rates were encouraging many borrowers to “take the plunge”.

He added: “Growing confidence in the housing market as prices rise is also stoking the market.”