Jump in home loans should be treated with caution

A sharp rise in mortgage lending last month reflects seasonal trends rather than a sustainable pick-up in the housing market, economists have warned. Total mortgage lending hit £12.3 billion in June, the Council of Mortgage Lenders revealed, more than 17 per cent up on May’s figure of £10.5 billion, and the highest monthly total this year. Early summer is traditionally the busiest time of the year for the housing market. However, last month’s mortgage lending was still 48 per cent lower than in the same month last year, and the CML said that over the three months to the end of June, total mortgage advances had been just £33.3 billion, no more than in the first quarter of the year, which was the worst period for the sector since 2001. Howard Archer, the chief economist at IHS Global Insight, said these factors would combine to mean that housing market activity would remain below historical levels for ‘some time to come’, adding that the cost of some mortgage finance had actually begun to increase over the past month or so.