Mortgage lending reached a five-year high of £17.6bn in October, up 37 per cent from the £12.9bn lent during the same month one year earlier, new statistics show.
According to the Council of Mortgage Lenders, the figure marks the highest monthly gross lending estimate since 2008. Furthermore, the CML states gross lending has risen nine per cent from September, which saw £16.2bn in total mortgage lending activity.
Many UK economic and housing experts are warning that when combined with the second phase of the controversial Help to Buy scheme, the rapid rise in property market activity could be the start of a new housing bubble, which may lead to a rise in interest rates.
Recent research revealed UK home buyers are selecting larger mortgages to purchase property as more options are becoming available for Britons with small deposits.
Research from the Mortgage Advice Bureau shows that the average loan-to-value on October’s property purchases stood at 72.2 per cent, which is a significant increase of 3.3 per cent from the September average of 68.9 per cent.
The Barnsley, Chelsea, Norwich & Peterborough, and Yorkshire building societies all returned to their previous practice of handing out mortgages that only require five per cent down, some of which are priced more cheaply than the current Help to Buy scheme.
“High LTV lending is 80pc higher than last October which has spurred a complete renewal in mortgage lending, as first-time buyers have raced back to the market,” said SPF Private Clients chief executive Mark Harris.
According to Harris, although last month’s gross lending figure was the highest since the £18.6bn tallied in October 2008, it was still five per cent lower, suggesting that the UK is still in the midst of a recovery.
“This increase in lending will continue to fuel the debate about an early interest rate rise. However, borrowers shouldn’t panic as we believe that with inflation falling close to its 2pc target and the economy still in recovery mode, it is unlikely that the Bank of England will risk hiking interest rates too soon,” he continued.
Howard Archer, an economist at IHS Global Insight, stated, “The further marked increase in mortgage lending will undoubtedly fuel concern that we are on our way to another housing bubble. We currently suspect that house prices could rise by around 1.5pc over the final couple of months of 2018 and then increase by 8pc in 2018.”