With 34,100 loans taken out (worth £4.2 billion), remortgaging up by 30pc on August 2010.
House purchase lending also rose in August according to the CML data. There were 52,000 loans advanced (worth £7.9 billion), up from 48,700 (worth £7.2 billion) in July and from 51,000 (worth £7.7 billion) in August 2010.
House purchase lending is spread across both first-time buyers, and home movers and both contributed to the rise. The number of loans to first-time buyers rose 5% both from last month and August last year, while the value rose by 4% from July and a larger 9% from August 2010.
Home movers took out 33,000 loans in August (worth £5.5 billion), an 8% increase (10% by value) on July and up 1% (2% by value) from August 2010. Lending to both first-time buyers and home movers was at its highest for over a year.
Lending criteria for both groups in August showed little change from the previous months. First-time buyers continued to put down on average 20% of their property’s value as a deposit and borrowed 3.20 times their income, slightly up from 3.17 times in July.
Typical deposits for home movers stayed at 31% for a second month but in August home movers on average paid 9.4% of their income on mortgage interest payments – the lowest since monthly records began in 2002. This is likely to reflect the low interest rates currently available to borrowers with a large amount of equity, typically home movers.
Around 96% of first-time buyers in August took out a repayment mortgage, unchanged from July and out of 33,000 home movers, 82% (26,900) did the same, up from 80% in July. As existing first-time buyers themselves begin to move home or remortgage, the likelihood is that they will retain a preference for repayment mortgages which will increase the overall popularity of this type of business.
Paul Smee, director general of the CML, commented: “Even though it is impossible to ignore the knocks to confidence emanating from the Eurozone, August lending showed welcome signs of life. With those moving house experiencing a record low in the proportion of their income needed to pay their mortgage interest, it is clear that the low rate environment is a benefit to those with mortgages, even against the backdrop of the gloom in the wider economy.”
Chris Broome, of Broome Financial Planning, said: “These latest mortgage figures are encouraging given the overall state of the economy.
“On the one hand, you have an economic climate that disincentivises people to buy, but on the other hand the combination of highly competitive mortgage rates and low house prices is proving irresistible.
“In many respects, prospective buyers and homeowners have become hardened to the current climate.
“People have to get on with their lives and more of them are doing just that.
“The sharp rise in remortgages since last summer reflects just how much more attractive the mortgage products out there have become.
“Although interest rates are expected to stay on hold for some time yet, people feel they cannot turn down some of the rates currently on offer.”
Paul Hunt, managing director of Phoebus Software said: “By pre-recession standards, August wasn’t a bumper month for mortgage lending, but by any more contemporary measure, it was very strong indeed. Lending increased for remortgagors, home movers and – most importantly – first-time buyers.
“It’s all based on growing lender confidence as a result of the prospect of ultra-low interest rates for the foreseeable future. This has led to the cheapest ever fixed rates being announced this month, with a 2 year fix now on the market for less than 2%.
“What’s more, the MPC’s latest decision to expand the QE programme will give lenders even more reason to feel optimistic about the ability of borrowers to take on debt. It’s clear the Bank is committed to protecting economic growth and that the current rate of inflation will not cause a rate rise any time soon.
“That’s why there has never been a cheaper time to take out a mortgage and even though there are major economic questions still to be answered in the UK, the record affordability of mortgages will sustain the property market in the coming months.