Despite lending reaching its highest level, Michael Coogan director-general at the CML, said it would have no real impact on the market. He said: “The £1 trillion threshold is clearly a landmark but it does not have any particular significance for policy-makers or others. Although it is a milestone, it will perhaps soon be forgotten as home ownership and mortgage lending continue to grow.”
Commenting on the record level of lending, Drew Wotherspoon, of John Charcol, said: “While £1 trillion in mortgage debt is a huge sum, when you consider the fact there is an unmortgaged property wealth of around £3.6 trillion, this means that the UK’s loan-to-value (LTV) is a mere 22 per cent, which is healthy to say the least. While the amount of mortgage lending has been pushed up by the boom in house prices, there is little to suggest consumers are saddling themselves with mortgages they cannot afford.
“Approval figures for May are at record levels, proving that, despite previous fears of a crash in house prices, the market has picked itself up and the appetite for home ownership among consumers is firmly back on track. I see no reason for this confidence to subside.”
Louise Cuming, head of mortgages at moneysupermarket.com, added: “The CML figures show the average person taking out a mortgage during 2005 spent just 14.6 per cent of their income on interest payments, compared with 25.8 per cent in 1990, signifying affordability is better now than 15 years ago.”
However, Cuming admitted the amount of unmortgaged property wealth, coupled with lower levels of borrowing against income, could fuel an increase in released equity. She said: “This could upset the balance of the economy, or allow people to replace their unsecured debt with secured borrowing, which is often more expensive over the long-term and puts their property at risk.”
