BoE report record leap in mortgage lending
The latest figures from the Bank of England show a record increase in mortgage lending for July.
Home loans for the month rose by 1.2% to £8.4bn – the highest since records began in April 1993. The increase coincides with the Monetary Policy Committee’s decision to cut the base rate to its lowest level in nearly 50 years.
The number of new mortgages taken out in July also rose to 111,000, the highest level since the housing boom showed signs of abating last November.
But with the number of first-time buyers on the decline, and the housing market slowing, it is thought that the increases are down to homeowner re-mortgaging their properties in order to take advantage of low interest rates – currently set at 3.5%.
The thought that people are still looking to release equity from their homes despite an uncertain housing market and the prospect of rate increases next year – according to many City analysts – has caused concern.
And even though consumer credit slowed in July, rising by only £1.5bn, compared with £2.15bn in June, analysts have warned that many people could become overburdened with debt.
That echoes comments made by the BoE’s chief economist, Charles Bean, last month.
Mr. Bean pointed out that the recent “build-up of household debt” could make consumers vulnerable if economic conditions took a turn for the worse.
He also pointed out that although unemployment is low at the moment, complimenting the low interest rates, the fact that a third of households have no liquid assets means that many people would have to make major cutbacks if they suffered job losses or other major changes to their income.
