Buoyant mortgage lending fuels talk of interest rate rise next week

New figures from UK Finance, the umbrella body for finance houses, show gross mortgage lending in September rose to £21.4 billion - that’s five per cent higher than a year ago.

UK Finance’s senior economist Mohammad Jamei says: “As we near the end of 2017, our data is showing that housing market activity has built up modest momentum since the start of the year, helped by an increase in first-time buyer numbers.”

Agents have responded enthusiastically to the uplift.

“What we are seeing is continuing resilience at street level and certainly no signs of any major corrections. There is no doubt buyers are more cautious and will only proceed if they can recognise perceived value almost irrespective of imminent rises in interest rates” says Jeremy Leaf, north London agent and a former RICS residential chairman.

John Bagshaw, corporate services director of Connells Survey & Valuation, says: “Having benefited from a decade of low interest rates, consumers are sensing that this era is nearing an end. Many older mortgage deals expire this autumn which means moving to more expensive standard variable rates. As a result, homeowners on these deals are opting to refinance, taking advantage of intense competition in the mortgage market.”

The mortgage figures coincide with the release of wider economic data in the form of Gross Domestic Product which rose by 0.4 in the thrid quarter of 2017, compared with 0.3 per cent in each of the first two quarters.

Economic analysts suggest this is likely to prompt an increase in Bank of England base rate when the Monetary Policy Committee meets next Thursday.

Howard Archer, chief economic advisor to forecasters EY ITEM Club, suggests it is likely that base rate will be up from 0.25 per cent to 0.50 per cent. “Significantly, the Bank of England’s recent more hawkish stance has come despite its expectation that GDP growth was limited to 0.3 per cent quarter-on-quarter in the third quarter” he says.