Mortgage lending surges in August despite Brexit fears

Mortgage lending rebounded in August - showing fears raised about the housing market in the wake of the Brexit vote have been "wide of the mark" - banks and building societies have said.

The Council of Mortgage Lenders (CML) reported its strongest August since 2007 - with an estimated £22.5 billion-worth of home loans handed out.

This was 7% higher than July's lending total of £21.1 billion. Mortgage lending was also up by 15% year-on-year, from £19.5 billion in August 2015.

The CML said: "This is the highest August figure since 2007 when gross lending reached £33.6 billion."

August's estimated monthly lending total is the highest seen since March, when buy-to-let investors were rushing to beat a stamp duty hike that came into force for the sector on April 1 by snapping up properties.

CML senior economist Mohammad Jamei said: "Widely voiced fears in recent months about the housing market have proved to be wide of the mark.

"Prospects for house purchase activity post-referendum look slightly subdued, when compared to late 2015 and early 2016. However, sentiment in the market recovered in August. This is reflected in stronger-than-expected transaction figures, and in our gross lending estimate."

He said the recovery in sentiment is likely to be down to several factors, including steps taken by the Bank of England, which recently cut the base rate to 0.25%, making mortgage costs cheaper for many homeowners.

Mr Jamei said a pick-up in mortgage approvals is anticipated "albeit still at levels lower than earlier this year as affordability constraints and lack of properties on the market for sale continue to bear down on borrowers".

He said: "The Bank also continues to indicate another rate cut is on the cards, if medium term prospects remain unchanged."

Howard Archer, chief UK and European economist at IHS Global Insight, said: "With the economy currently showing resilience following June's Brexit vote, we expect house prices to be essentially flat over the final months of 2016."

He continued: "We believe housing market activity will be increasingly pressurised in 2017 as mounting uncertainty affects the economy and also constrains consumer confidence and willingness to engage in major transactions.

"We suspect that business and consumer uncertainty will heighten in 2017 once the UK formally launches divorce proceedings from the EU."