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Remortgage activity helps boost lending rates

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  • 01/09/2000
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June saw a significant rise in mortgage lending, up from £10.1bn in May to £11.5bn, according to the...

June saw a significant rise in mortgage lending, up from £10.1bn in May to £11.5bn, according to the latest DETR/CML figures.

The increase has been fuelled in part by higher levels of remortgage activity. In June remortgaging accounted for £3.3bn of all mortgage lending, compared with £3bn in the previous month and £2.5bn for the same period last year.

Average mortgage rates fell across the board in June. The average new variable rates fell from 6.06% to 6%, while the average new fixed rates fell from 6.44% to 6.36%, with 35% of new loans being taken out at fixed rates.

Bernard Clarke, communi-cations manager at the CML, said: “The long-term view is that growth is more sustainable than last time.”

First-time buyers accounted for 45% of all loans for house purchase in June, the lowest figure seen on a quarterly basis since the same period in 1997.

David Dooks, director, statistics at the British Bankers Association, said: “Some first-time buyers have been priced out because house price inflation is higher than wages, but prices have now stabilised and consumer confidence is still high.”

Lending by the major UK banks rose in June by £7,386m compared with the rise of £5,313m in May, according to figures from the British Bankers Association. The increases are partially attributed to a strong demand for remortgaging and equity release.

Dooks said: “The increase in remortgaging and equity withdrawal has arisen because there is less turnover in the housing market. People are staying where they are and building extensions. They are starting to view their property as a home rather than an investment.”

Figures from the Building Societies Association for June show that gross advances for mortgage lending from building societies has increased to £2.2bn, up from £2bn in May.

“It is too early to say whether there will be a soft landing for the housing market, but this is not like the 80s boom. Affordability is still good and there is less debt this time round,” said Dooks.

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