Mortgage lending increased in October

Mortgage lending increased by 5% in October compared to September according to the Council of Mortgage Lenders (CML).

The 5% rise in gross mortgage lending in October is in line with expectations as there has been a 5% monthly rise between October and September over the last decade.

There was an estimated £13.5 billion of gross mortgage lending in October, compared to £12.9 billion in September, however the CML expects to see a seasonal slowdown in the take up of mortgages during the last few months of the year.

The CML has noticed a change in the current mortgage market compared to previous years. House purchase activities have increased throughout this year, creating a stronger demand for new mortgages, however remortgaging has dropped to decade-low levels as many borrowers have little incentive to refinance when they move onto low reversion rates, and others find themselves unable to do so due to equity constraints.

Although the CML acknowledges that there has recently been an improvement in the outlook for the economy – unemployment has not risen as sharply as feared and consumer confidence is improving – it expects only a modest improvement in the housing and mortgage markets next year.

There are also fears that interest rates may have to rise sooner than expected and that availability of credit will remain constrained, according to the CML’s outlook for 2010.