Mortgage lending surged to a seven year high this summer due to record low interest rates, according to the Council of Mortgage Lenders (CML).
The data also reveals that there has been a surge in buy to let lending over the summer, as more people are looking at property as an investment for the future and have been encouraged by the strength of the private rented sector.
During July, gross mortgage lending hit £20 billion, marking a 12% year on year rise and the third consecutive month of growth.
Bob Pannell, chief economist at the CML, told the Financial Times that mortgage lending is experiencing its best period since 2008, due to a surge in house purchasing and remortgage activity during the last few months.
Buy to let mortgages have been the best performing form of lending, with around 25,200 loans issued in July, up 14% compared to the previous month and almost two fifths higher than July 2014. The total value of these mortgages reached an impressive £3.8 billion, up more than half compared the the same month last year.
So why is the mortgage market so hot right now? Well, low interest rates is one factor that is very appealing to applicants, both new and existing customers. In addition, rising house prices are driving people to take out loans for property, as investors are spotting the potential for healthy capital appreciation.
Some commentators believe that the rise in lending is connected to the changes in the laws concerning pensions, which came into effect in April and allow those retiring to have greater freedom over their pension pots. This could be fuelling the buy to let market as people are hoping for a safe bet when it comes to investing for their future.
The director general of the CML, believes that the overall growth in lending will continue, as general improvements in economic factors across the UK allowing more people to get onto the property ladder whether that be getting on the first rung or climbing ever higher.
`This positive direction of travel going into the autumn reinforces our recent revised forecasts that lending levels should continue to grow gradually over the rest of the year after a subdued beginning to the year` he noted.
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