"Against this backdrop, remortgaging has become the key driving force, as borrowers make the most of record low mortgage rates which, if anything, might fall even further."
In addition to the month-on-month rise, lending rose 15% year-on-year, from £19.5 billion in August 2015. This is the highest August figure since 2007 when gross lending reached £33.6 billion.
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.
"This recovery in sentiment is likely to be down to a number of different factors, including the Bank of England’s monetary stimulus and its introduction of the Term Funding Scheme in August. A subsequent uptick in 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. The Bank also continues to indicate another rate cut on the cards, if medium term prospects remain unchanged."
Henry Woodcock, principal mortgage consultant at IRESS, said that it was "surprising to see lending grow in August" as the holiday month typically has a seasonal downturn in lending compared to July. In 2015 August was 8% lower than July.
John Eastgate, Director of Sales & Marketing at OneSavings Bank, commented: “Mortgage market activity is slowly returning to its former health, as concerns over political and economic instability are pushed to one side by more prospective borrowers unwilling to wait indefinitely. While the economy has slowed, talks of a recession seem to have faded, and the Bank of England has intervened to support economic growth, and with it the mortgage market.
“Against this backdrop, remortgaging has become the key driving force, as borrowers make the most of record low mortgage rates which, if anything, might fall even further. The affordability gap continues to drag on house purchase figures, and will do so for as long as housing demand outstrips supply, bolstering house prices in the long-term. Buy-to-let demand has bounced back strongly in the summer, although we may see certain parts of the sector dampen depending on the outcome of the PRA consultation. That said, there may well be a short term flurry of activity as many landlords rush to buy or refinance before any criteria changes come into effect.”
David Copland, Director of Mortgage Services at LSL Financial Services, added: “The robustness of the mortgage market continues to surprise following Brexit. With gross lending up 15% year-on-year, the CML’s figures are the latest to defy doomsday predictions of a housing slump. Although advisers must continue to operate with healthy scepticism, the underlying strength of completions gives us every reason to remain confident in the UK housing market.”
