mortgage levels

Mortgage lending has climbed to a seven year high due to rising house prices and increasing consumer confidence within the UK. Reports show that banks approved more loans and overdrafts in October than they have ever done over the last decade.  This has led to a new dilemma for policymakers.

Bank of England governor Mark Carney only recently warned about the rising level of household debt. Andy Haldane, his chief economist agreed that they may have to intervene to reduce demand across board.

Their concerns and position will be further strengthened by the fact that gross mortgage lending climbed to £12.9bn in October.  This is a 26% increase from October 2014 and is the highest level since the crash in 2008. There was also a rise of 21% for house purchase loans as the number rose from 44,825 in September to 45,437 in October.

There are a number of factors which can be attributed to this steady rise in the amount of people obtaining mortgages. One factor at play relates to the buy-to-let market being dominated by small landlords. Moving into property is an attractive prospect for those who are reaching retirement age and have also paid off their mortgage. With interest rates continuing to set at a low level, many feel that property is a reliable investment to allow their retirement funds to grow.

Another reason that can be attributed to the rise in mortgages within the house market is increased buyer knowledge. With the internet readily available to the vast majority of the population, accessing information on money saving advice and specific programmes designed to help users calculate their cheapest mortgage rate has allowed people to become savvy to tricks that banks and mortgage lenders might have been able to play in the past.

Net lending for personal loans haven’t been left out either as they have risen by £228m in October which is the largest monthly rise since 2006.  Net borrowing by businesses rose by £600m in October after falling by £1bn in September and net borrowing through personal loans have continued to grow at an annual rate of 5 per cent since the last 12 months.

These statistics simply point to a strong housing market. Consumers are also exhibiting confidence in their rising incomes, tempered by the aforementioned low interest rates meaning that households have more disposable income now than they may have had a few years ago. Mortgage rates are currently at multi-year lows and consumers are taking up the very competitive deals on offer by banks. Consumer awareness campaigns have ensured that people know exactly what they are getting when they take up current mortgage deals and have therefore eliminated investor apathy.

However, experts are looking at the position of Mark Carney and the BoE as hint that mortgage lending may be poised for a major shakeup. The central bank is expected to make a decision that will affect the market over the next few years as it looks for new ways to make the market less attractive than it is presently.