UK Finance has stated that strength in remortgage activity amongst homeowners, alongside stronger first-time buyer numbers, are likely to have been the drivers of mortgage lending in October, as its estimate showed £23.1 billion borrowed, 14% higher than a year ago.
Two-thirds of this was carried out by high street banks, which translated to £15.3 billion.
At 7.1%, total amount of credit outstanding grew at a slower pace in October compared with the previous month, while the growth in credit card borrowing remains strong, partly driven by the inflation rate. Growth in credit outstanding by high street banks was 5.1%, which also represents a slower pace than seen in September.
The trade body said latest figures from the high street banks suggest that businesses continue to exercise a cautious approach to borrowing with survey indicators showing demand for credit from smaller and medium sized businesses falling in the third quarter.
Mohammad Jamei, UK Finance’s senior economist, said: “The anticipated bank rate rise saw a flurry of remortgage activity as many homeowners took advantage of the competitive rates on offer. Borrowing was also boosted by stronger first-time buyer activity as this segment benefitted from good credit availability, lower rates and government housing schemes.
“In terms of saving, consumer deposits grew at a slower rate in October, while businesses have continued the trend of bolstering their cash reserves amidst a cautious business landscape due to Brexit uncertainties.”
Nick Chadbourne, chief executive of LMS, added: “Strong mortgage lending in October paints a positive picture going forward.
“With mortgage activity 14% higher than the previous year, one month before the rise in the Bank rate, it will be interesting to see how the interest rate change will impact consumer activity going forward. Reminding borrowers that today’s affordability will not last forever, the small increase will potentially further incentivise the market to capitalise on staggeringly low rates now, and lock-in to five-year fixed deals while they still have the opportunity.
“Similarly, the small increase should encourage first time buyers to act now, before rates increase, and benefit from the Chancellor’s recent stamp duty cut for the lower thresholds.”