"Mortgage borrowing continues to pick up. The August increase is the largest in five years, although borrowing is still some way below pre-crisis levels"
- Richard Woolhouse, Chief Economist at BBA
Mortgage lending rose in the UK in August as people continued to put their money into bricks and mortar amid low interest rates and uncertainty over the timing of the rate hike. Gross mortgage borrowing soared an annual 14% in the reported month to hit 12.2 billion pounds - the largest increase since 2008, while the monthly rise of two billion pounds was the biggest in five years. According to the BBA report, the number of mortgage approvals rose to 46,743 in August from 46,315 in July. This was the highest since February 2014, when it totalled 47,581. On an annual basis, the number of approvals in August was 23% higher, with re-mortgaging up 38% - the highest level in four years, while house purchases rose 16% in the given period. Meanwhile, bank lending to companies increased in August, but it continues to be subdued.
However, the boom in home loans may be fraught with danger as a recent survey revealed that more than a half of borrowers say they would struggle or fall behind with mortgage repayments if interest rates rise up from 0.5%. As the Building Societies' Association revealed in its report, there are nearly two million homeowners who have never experienced a rate rise and it could cause difficulties.
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