Fresh evidence emerged today that the mini-boom in property prices continues apace, with official figures recording the highest ever seasonal mortgage lending and approvals for a May period last month.
But economists nevertheless expressed caution, reaffirming their predictions that the market will be squeezed over the coming months and pointing out that the inflationary impact of jumping prices could prompt a rise in interest rates.
According to the Council of Mortgage Lenders, which collectively represents 98 per cent of all residential mortgage lending in the UK, gross loans for buying properties totalled £28.7 billion last month.
The Council said lending was 18 per cent higher than in April, and almost 30 per cent up on the previous year.
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“It was the strongest May figure on record and only 0.5 per cent below the record for a single month seen in July 2004,” it said.
On top of that, the British Bankers’ Association - whose members cover about 65 per cent of the market - said mortgage lending worth £5.7 billion was approved last month.
The BBA, which said a total of £517 billion is owed as outstanding mortgages, said this was higher both than the previous month and the average over the past six months.
David Dooks, the BBA’s director of statistics, said: “May’s rise in mortgage lending, the largest monthly increase since the rise of £6 billion in April two years ago, shows the mortgage market to be very much alive at a time when annual house price growth is strengthening.”
And Michael Coogan, the director-general of the CML, added: “Lending has hit record levels in six of the last eight months supported by the strength of the London market, interest in higher-priced properties, and strong consumer confidence.”
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Although Mr Coogan said his organisation expects demand to moderate later in the year, he said it still looks set to be “robust” for the immediate future.
John Butler at HSBC said: “This set of data will not move the financial markets or alter any views but it is interesting that the appetite for debt, which had been perceived by the market as a major risk a year ago, is still very strong.
“In our view, households’ appetite for credit provides a near term risk of higher interest rates but also introduces a medium term downside risk to GDP.”
Howard Archer, the chief UK and European economist at Global Insight, added that the affordability of properties is already been strained, with price inflation substantially outstripping earnings growth.
“In addition, house buyers will be concerned by the very real possibility that interest rates could increase before the end of the year, as this would further stretch affordability,” he said.
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Today’s figures come just a day after Rightmove, the property website, said asking prices rose by 0.8 per cent last month, fuelled by the mini-boom in London and the south-east.
Rightmove reckons the average property price is £211,442, compared with £209,829 the previous month.