UK mortgage lending hits five year high

Gross mortgage lending in October has risen to £17.6bn according to Council of Mortgage Lenders (CML) data. This represents an increase of 36.6 per cent year-on-year and nine per cent month-on-month and was the highest monthly gross mortgage lending seen since October 2008.

The housing market is being supported by improving consumer confidence, increasing employment and extended low interest rates, and is being fuelled increasingly by the Funding for Lending Scheme and the first stage of the government's Help to Buy scheme. House price rises are being seen not only in London and the South East but across the country.

Howard Archer, IHS global Insight:

The further marked increase in mortgage lending will undoubtedly fuel concern that we are on our way to another housing bubble. We currently suspect that house prices could rise by around 1.5% over the final couple of months of 2013 and then increase by 8% in 2014. While these projected house price rises are expected to be driven by increases in London (especially) and parts of the South East, house prices are likely to strengthen appreciably in most regions and to make gains across the country.

There is a significant prospect that house prices will rapidly rise across the regions, assisted by the governments Help to Buy. The lack of significant supply is certainly having an impact on prices, with the October RICS survey reporting that “the pace of demand exceeded that of supply in every part of the country, pushing up prices. At the national level, the gap between demand and supply is now at its greatest since May 2009.

The rising activity in the housing market will focus the minds of policymakers to prevent the possible development of a new housing bubble.