August mortgage borrowing sees largest increase since 2008

Net borrowing of £2bn was also the highest monthly rise since August 2010.

The number of mortgage approvals last month was 23 per cent higher than a year ago, with remortgaging up 38 per cent – its highest level for four years – and house purchase up 16 per cent.

The BBA stated that existing borrowers are seeking fixed rates to control their mortgage costs, while market competition is also producing attractive deals for new buyers.

Richard Woolhouse, chief economist at the association, commented that people are putting their money into bricks and mortar while interest rates are low and the timing of a likely rate rise remains uncertain.

“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.

“Remortgaging numbers also continue to be strong, as shrewd homeowners snap up competitive deals.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, cautioned that borrowing is still some way below pre-crisis levels, suggesting a more moderate and sustainable housing market.

“Lenders are keen to lend, resulting in some very competitive mortgage deals. The mortgage market remains over supplied with lenders having more money to lend than there are people looking for home loans,” he commented, adding that this means criteria will have to loosen and rates will have to remain low to ensure lenders hit their volume targets.

“So despite fears of an interest rate rise next year, there is still some excellent pricing on fixed rates, with five-year deals available at less than 2.5 per cent. Such deals are boosting the popularity of remortgaging and we expect this to continue during the autumn.”

Mr Harris also argued that for many, the main issue is not so much finding a cheap mortgage rate, but being able to prove affordability to satisfy the lender and meet tighter criteria post Mortgage Market Review.

peter.walker@ft.com