The figure is up from £25.2 billion in July, and is one of the highest figures on record, 4 per cent higher than the £26.5 billion of August 2004, and the highest figure since July 2004.
There was an increase in all types of lending, although the most pronounced increase was in remortgaging. Remortgaging went up by 15 per cent to £11.7 billion in August from £10.2 billion in July, reaching its highest level since October 2003. This probably reflects borrowers taking advantage of lower interest rates and remortgaging into cheaper deals, especially as a large number of people will have been coming to the end of their previous deals. But as a proportion of total business remortgaging rose only slightly, from 41per cent in July to 43 per cent in August.
Lending for house purchase rose by 6 per cent to £12.5 billion in August, up from £11.8 billion in July, but down slightly on the £12.8 billion recorded last August. Lending for house purchase accounted for 45 per cent of lending, down from 47 per cent in July and 48 per cent last August.
The number of loans for house purchase rose from 96,000 in July to an estimated 101,000 in August. However, this was still below the 110,000 in August last year. First-time buyers accounted for 30 per cent of this total, very similar to the proportion throughout the past year (which has varied from 28 per cent-32 per cent on a monthly basis).
Further advances accounted for 8 per cent of gross lending, broadly the same proportion as last month, but rose in terms of value by 11per cent from £1.9 billion to £2.1 billion. Further advances (typically used to finance home improvements) have been hovering around the £2 billion monthly level since March.
Affordability maintained a similar picture to previous months. Typical first-time buyers borrowed around 87 per cent of their property value, representing 3.22 times their income. Typical movers borrowed 68 per cent of their property value, representing 2.95 times their income. However, the pricing of both fixed and variable rate products continued to fall, with the average fixed rate in August at 5.23 per cent and the average variable rate at 5.61 per cent. The pricing differential between fixed and variable rates prompted a further increase in the popularity of fixed-rate business, which accounted for 54 per cent of all loans in August, the highest proportion ever since monthly records began in 1998.
Commenting on the figures, CML director-general Michael Coogan, said: "The doom-mongers' prophecies look to have been wrong, as lending has continued to strengthen over the summer. Although the market remains far from spectacular in terms of transaction numbers and house prices, the prospects of a significant market correction are receding.
"The fact that the housing market is holding up is likely to be welcome news for the MPC, as it struggles to reconcile the very different pictures emerging from different sectors of the economy. We continue to expect a moderate market for the foreseeable future."
