Mortgage lending increased sharply in August suggesting that fears raised over the UK housing market in the wake of the Brexit vote have been 'wide of the mark', the latest Council of Mortgage Lenders (CML) figures show.
The CML estimates that £22.5bn worth of home loans were handed out last month, up 7% from July and 15% higher than August last year, making it the strongest August for mortgage lending since 2007 when gross lending reached £33.6bn.
"Widely voiced fears in recent months about the housing market have proved to be wide of the mark," said Mohammad Jamei, a senior economist at the CML.
"Prospects for house purchase activity post-referendum look slightly subdued, when compared to late 2015 and early 2016,â€ he added. "However, sentiment in the market recovered in August. This is reflected in stronger-than-expected transaction figures, and in our gross lending estimate."
Jamei said that the recovery in sentiment is likely to be down to several factors, including the Bank of England's monetary stimulus and its introduction of the Term Funding Scheme last month.
He continued: "A subsequent uptick in approvals is anticipated, albeit still at levels lower than earlier this year as affordability constraints and lack of properties on the market for sale continue to bear down on borrowers.
"The Bank also continues to indicate another rate cut on the cards, if medium term prospects remain unchanged."
The CML added that the biggest concern was the general lack of homes on the market for sale, with CML figures showing that the average number of properties per surveyor is close to an all-time low.
Meanwhile, the number of house purchase approvals fell to an 18-month low of 61,000 in July.
"There are still constraints on the market, namely the lack of stock, which has the potential to reduce the number of transactions and therefore reduce mortgage activity, constraining the level of growth that we were seeing earlier on in the year," said Paul Smith, CEO of haart estate agents.
However, the encouraging mortgage data from CML revealing that activity jumped back up in August after hitting a blip in July ultimately shows that projected fears about the collapse of the housing market in the wake of a Brexit vote "were misguided", according to Smith.
Many commentators believe mortgage approvals are now likely to fall over the coming months as the combination of a waver in consumer confidence and economic uncertainty causes people to reconsider moving or buying a first home.
Henry Woodcock, principal mortgage consultant at IRESS, commented: "If there are no unforeseen bumps in the economy, the optimist in me - encouraged by these figures - would expect mortgage approvals and advances to increase further over the coming months - but at lower levels of growth than in 2015 - as lenders seek to hit end of year targets."
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