Latest figures from the Council of Mortgage Lenders (CML) show higher borrowing costs contributed to a decline in gross lending in September, with the bulk of the impact being felt on lending for house purchase rather than remortgaging.
Data from the CML's regulated mortgage survey showed that September's total of £30.6 billion was lower than August's (£34 billion) but higher than a year ago (£29.2 billion in September 2006). At £12.7 billion, house purchase borrowing was lower than in both the preceding month (£16.2 billion) and in September last year (£13.9 billion).
But remortgaging and other lending remained buoyant in September. At £11.1 billion, remortgaging was higher than in August (£11 billion) and in September last year (£10 billion). And the strength of buy-to-let helped sustain other lending, which totalled to £6.8 billion, the same as in August but higher than in September 2006 (£5.3 billion).
The average mortgage rate was 6.02 percent in September, compared with 5.91 percent in August. As a result, affordability worsened for both first-time buyers and movers. Commenting on the figures, the CML's director general Michael Coogan said:
“The data shows that higher interest rates are now beginning to slow the housing market, in line with our recently published forecasts. Looking forward, we expect remortgaging to continue to hold up as borrowers coming off fixed rate deals look to re-finance. However, market conditions may mean that mortgage customers see an increase in costs, and the Bank of England's decision not to reduce rates earlier this month will have disappointed many borrowers.
“Looking forward, affordability is likely to continue to constrain buying activity, which we expect to remain subdued. But rates have now reached their peak and a move downwards will help ease some of the pressure on household finances.”
