April highest since 2008 for lenders

An estimated £16.6bn of mortgages were handed out last month, more than a third (36 per cent) higher than the same month a year ago, the Council of Mortgage Lenders (CML) said.

The total is up eight per cent on March’s gross lending figure and the highest monthly figure this year so far. It also marks the highest amount lent during April since 2008.

The upturn comes despite toughened lending rules coming into force last month, which mean people applying for a mortgage face more detailed questions about their spending habits.

Lenders also now have to apply a “stress test” to applications to make sure borrowers could still comfortably afford their repayments as and when interest rates rise.

CML chief economist Bob Pannell said the implementation of the new Mortgage Market Review (MMR) rules in late April makes it “harder to interpret” recent lending figures.

He cautioned: “There may be some disruption to the monthly pattern of activity while MMR procedures bed down.”

Yesterday, Lloyds Banking Group, Britain’s biggest mortgage lender, said it had decided to impose a lending cap for people looking to borrow more than £500,000. The rule prevents people wanting to borrow over this amount from getting more than four times their income.

The policy will apply across the UK but Lloyds said it is primarily designed to tackle specific pressures of house price inflation in the London market.

The group, which has around a quarter of the mortgage market in terms of balances outstanding, said the policy applies across the brands of Halifax, Lloyds Bank, Bank of Scotland and Scottish Widows Bank.

Prime Minister David Cameron also said yesterday that he would consider making changes to the Government’s flagship Help to Buy scheme, which gives people with 5% deposits a helping hand on to the property ladder, if the Bank of England suggests these are needed.

Bank governor Mark Carney recently indicated he was ready to take action to cool the market amid concerns over the threat a new property price bubble could pose to the wider economic recovery. Mr Carney signalled the Bank could adopt a range of measures, including advising the Government to rein in Help to Buy.

Figures released by the Office for National Statistics (ONS) have shown that house prices have jumped by 8% over the last year across the UK to reach around £252,000, and in London they have surged by 17% to £459,000 on average.

Critics of Help to Buy have blamed the scheme for placing an extra upward pressure on prices by fuelling demand from buyers in areas where the supply of homes is failing to keep up.

Mr Pannell said comments by Mr Carney have reinforced the CML’s conviction that any interventions will be “measured”.

He said any possible steps to limit the housing market upturn “will, in our estimation, be careful, calibrated, and proportionate, and designed to reinforce prudent affordability checks, rather than to apply the brakes to the housing market in a more dramatic fashion”.