The amount of money being lent by banks and building societies to homeowners reached its highest level in the month of January since 2008, data shows.
With the buy-to-let market stumbling to get back in gear after April’s stamp duty hike, first-time buyers and remortgages are now propping up the mortgage market, the Council of Mortgage Lenders said.
Last month, gross mortgage lending reached £18.9billion, which is 6 per cent lower than December’s £20billion total, but 2 per cent higher than the same point a year earlier.
Bubble: First time buyers and remortgages are now propping up the mortgage market
The figures for last month are the highest for any January since 2008.
Mohammad Jamei, a senior economist at the CML, said: ‘Overall mortgage lending continues to hold up pretty well, but we seem to have a twin-track market.
‘Weakness in buy-to-let and home movers has been offset by an increase in first-time buyers and remortgage lending.
‘A continuing acute shortage of homes being offered for sale is one aspect of a broken housing market, that looks unlikely to resolve in the near term.’
Recent data from the CML also revealed that in certain areas, like greater London, the number of home movers has slumped to its lowest level for 25 years.
‘The imbalance is likely to continue underpinning house price values’, the CML said.
The CML said mortgage approvals for house purchases rose to 68,000 in the final three months of last year, down from 70,000 a year earlier, but a ‘marked improvement’ from the 61,000 figure reported last summer.
The Bank of England now expects 71,000 loans to be approved each month in the first nine months of this year.
Across the UK, there are currently 11.1 million mortgages, with loans worth over £1.3trillion, the CML said.
Andrew McPhillips, chief economist at Yorkshire Building Society, said: ‘This annual growth in mortgage lending was most likely driven by an increase in the number of people re-mortgaging to better rates, offsetting the impact of a fall in property transactions.
‘Affordability constraints, caused by increasing house prices, the cost of stamp duty and rising inflation, are still hindering the market by limiting the number of people who can afford a property."
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘Lenders remain keen to lend, with some competing on rates while others tweak criteria.
Mortgage market: Across the UK, there are currently 11.1 million mortgages
‘This is likely to continue throughout the spring and we expect products to remain keenly priced.’
The Government recently unveiled a package of plans to boost the supply of housing across the country, including speeding up the house-building process and encouraging innovation from smaller builders, as well as helping renters.
On the subject of the Government’s Housing White Paper published earlier this month, the CML said: ‘The paper did not introduce any dramatic changes, but it did helpfully outline a broad set of policies to try and address snag points in the housing market.’
In the year to December 2016, UK house prices grew by an average of 7.2 per cent, compared to 6.1 per cent a year earlier.
The average UK house price was £220,000 in December, which is £15,000 higher than in December 2015 and £3,000 higher than in November, the Office for National Statistics said.