Mortgage lending has risen to £21.8 billion, up 19% from a year ago, industry figures have revealed.
According to the Council of Mortgage Lenders, this is the highest figure since 2008, when gross lending reached £23.6 billion.
Month-on-month, gross mortgage lending was 8% higher than September’s lending total of £20.1 billion.
The CML said mortgage lending was likely to exceed its forecast of £209 billion this year.
However, it believes market growth will be modest in the short term as affordability pressures will limit lending for first-time buyers and homemovers.
Bob Pannell, CML chief economist, said: “As lending in the regulated mortgage space picked up over the summer months, the pace of recovery has improved. This looks set to continue over the closing months of the year with the factors helping support this recovery continuing to be low inflation, strong wage growth, an improving labour market and competitive mortgage deals.”
The CML pointed out that approvals data for September from the Bank of England offered “mixed signals” about the months ahead.
In September, house purchase approvals dipped below 70,000, while those for remortgages rose to 41,000.
It said housing transactions have been slow to regain the levels of last year, largely influenced by the low level of properties offered for sale.
Supply constraints have reinforced upward price pressure across the country, adding to affordability pressures and further limiting future activity levels.
Jeremy Leaf, former RICS chairman and north London estate agent, said: “Demand for home ownership is high but affordability is a problem. With the average property price in London now £531,000 according to the ONS, unless you earn way above the national average salary, you have precious little hope of being in a position to buy. Generation rent is left out in the cold: they have aspirations to buy but are being pushed further away from their goal.
“Buying a property on your own is tough and getting tougher, with no prospect of that changing. First-time buyers who do not have help from their parents, Help to Buy or shared ownership, will struggle.”
Jonathan Harris, director of mortgage broker Anderson Harris, said borrowers were increasingly turning to intermediaries to help navigate the post-Mortgage Market Review world.
“Those who can jump through all the necessary hoops will be rewarded with some very competitive rates indeed – a trend which shows no signs of abating as lenders vie for business and interest rates look set to remain low.
“The biggest challenge for borrowers is meeting lenders’ affordability criteria, as property prices continue to rise in many areas while wages fail to keep pace. First-time buyers will find it difficult to get themselves in a position to buy unless they have assistance from the Bank of Mum and Dad. This should keep a lid on the market and ensure we don’t return to runaway growth.”
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