Mortgage lending in July hit its highest level since records began in 1998 but is likely to fall later in the year, according to the Council of Mortgage Lenders.
Despite the CML's figures showing a leap in gross lending to £15.5bn in July from £14.8bn in June, it anticipates a slowdown in house price inflation and lending as the UK economy feels the effects of the global slump.
The CML expects house prices to rise by only 3 per cent in 2002 and 2003 after being forced to more than double its prediction for 2001 to 11 per cent from 5 per cent following unexpectedly strong growth.
Although it has revised its forecast for the year, figures from the Building Societies' Association show banks have driven the upsurge as mutuals have experienced a slight downturn in business.
Society gross advances fell to £2.12bn in July from £2.28bn in June, with approvals for loans not yet made down to £2.26bn from £2.3bn. The BSA says the drop may be due to fears of a global recession.
CML director general Michael Coogan says: “Levels of lending continued to beat their previous records but are likely to slow down as we move into next year.
“The good news is that households are in a strong position to cope with any deterioration, with mortgages still affordable, and set to remain so, given that interest rates are expected to stay low.”