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Purchase lending recovers as multiples rise

The Council of Mortgage Lenders says mortgage lending saw another big rise in July with gross advances totalling £25bn, 12 per cent higher than in June.

The CML says there appears to be signs of recovery in lending for house purchase, which reached its highest since August last year. It totalled £11.6bn in July from £9.7 bn in June, a rise of nearly 20 per cent.

Remortgaging stayed strong in July at £10.7bn, 5 per cent higher than in June, despite accounting for 43 per cent of all lending compared with 46 per cent last month.

Fixed rates continue to increase in popularity, accounting for 55 per cent of lending in July, up from 53 per cent in June and 22 per cent a year ago. The average fixed rate was 4.12 per cent, compared with an average variable rate of 3.96 per cent.

The CML says all buyers are borrowing higher income multiples than they were a year ago. Although this is offset to an extent by lower interest rates, the general consensus is that rates are likely to rise next year.

CML director general Michael Coogan says: “July&#39s figures support the picture of a housing market that remains stronger than expected but the risks of a correction have not gone away and borrowers should remain wary of overcommitting themselves.”

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