A LARGE number of loans for house purchase drove mortgage lending higher in July, according to figures released by the Council of Mortgage Lenders (CML).

Gross lending was three per cent higher than in June, and 13 per cent higher than in July 2003, at a new record level of £29.2bn.

The figures were driven by loans for house purchase, which rose to a new record of £14.7bn, compared to £13.9bn in June and £11.9bn in July last year. There were 131,000 loans for house purchase in July, the highest total since the 135,000 recorded in August 2002. Once again, loans for house purchase accounted for half of gross lending.

Remortgaging totalled £11.3bn in July (£11bn in June), accounting for 39 per cent of advances, the same proportion as last month. However, in July last year, when remortgaging stood at £11.2bn, it accounted for 44 per cent of gross advances. Its decline as a proportion of lending, based on a similar total, provides further evidence of the current strength of lending for house purchase.

Despite affordability constraints faced by first-time buyers, they accounted for 28 per cent of loans for house purchase, compared with 27 per cent last month and 30 per cent in July last year.

Average fixed and variable rates both rose by 15 basis points last month but the spread between them remained very small, at just four basis points. Despite this, the proportion of fixed rate loans only rose to 38 per cent in July, compared to 34 per cent in the previous month, as more borrowers sought to shelter against higher rates.

CML director general Michael Coogan said: “While these figures do not reflect the full effects of recent interest rate rises, they clearly do show that there was a strong seasonal revival in the house purchase market this spring.

“Estate agents are continuing to report a slowdown in current activity in their offices but this will not be reflected in lending figures for a few months.

“The continuing growth in the popularity of fixed rate lending reinforces a trend we have seen since spring, indicating that some borrowers are responding to higher borrowing costs.”