Mortgage lenders are seeing their strongest activity in five years as the housing market revival continued in September.
An estimated £49.3 billion-worth of mortgages were advanced to home-buyers in the third quarter of this year, which is one third higher than last year and marks the highest quarterly total seen since autumn 2008, the Council of Mortgage Lenders (CML) said.
The CML’s latest figures show that an estimated £16.2 billion-worth of loans were handed out in September, a figure which is two-fifths (41%) higher than the same month a year ago.
The September lending total marks a slight drop on the £16.4 billion of mortgages advanced to buyers in August.
But it also shows that overall lending remains “steady”, the CML said.
Office for National Statistics (ONS) figures showed earlier this week that UK house prices reached a new high of £247,000 in August. This surpassed a previous peak reached in 2008.
But the ONS figures also showed that house price growth remains patchy across the UK, with prices rising by 8.7% year-on-year in London but dropping by 0.7% over the same period in Scotland.
The housing market is expected to see the heat of demand from would-be buyers turned up further over the coming months amid the launch of the Government’s new Help to Buy scheme, which offers state-backed mortgages to people with deposits as low as 5%.
Royal Bank of Scotland (RBS), NatWest, Halifax and Bank of Scotland started offering loans under the new mortgage guarantee scheme last week and have reported strong interest so far, while more lenders including HSBC, Barclays and Santander have confirmed their plans to come on board.
The new phase of Help to Buy had been due to start in January but was brought forward by three months.
Several lenders are expected to start offering new deals under the scheme around January, when the initiative was originally due to be launched.
Tougher mortgage lending rules are also set to come into force in April next year under the mortgage market review, which will make sure there is no return to irresponsible lending and banks and building societies only hand out mortgages that people can afford to pay back.
Lenders have already been toughening their borrowing criteria to make sure they comply with these rules and people taking loans out under Help to Buy will need to prove they are credit-worthy to get access to a deal, as they would with any other mortgage.
CML chief economist Bob Pannell said: “Indicators suggest we are witnessing the strongest house purchase performance in five years.
House prices too have revived but modestly, aside from a resurgent London market.
“With the Help to Buy mortgage guarantee scheme becoming fully operational in January and firms implementing the mortgage market review in April 2014.
“It may be several months into 2014 before we get a true gauge of the scale and reach of Help to Buy.
Mr Pannell added: “For now, the scheme has launched against an already recovering UK housing market with several quarters of improving credit availability, growing competition, and strengthening demand.”