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UK mortgage lending near 4-year high

Tuesday, December 24 11:17:39

British lenders provided more mortgages for home buyers in November than in any month in nearly four years, figures showed today, raising fresh concerns about the risk of a bubble in the housing market.

Separate data showing a fall in productivity in the third quarter underscored the challenge for the Bank of England as it tries to steer the economy towards a full recovery.

Mortgages for home purchases rose to 45,044 in November, up from 43,315 in October and their highest level since December 2009, the British Bankers Association said.

"Lending will continue to be strong in the months ahead," BBA statistics director David Dooks said.

Compared with a year earlier, the number of mortgages were up 39 percent although they remained below levels of more than 70,000 in some months in late 2006, before the financial crisis.

The BBA said official programmes to spur mortgage lending were helping first-time buyers and people seeking to move up the property chain.

Last month, the Bank of England and the government said they would stop encouraging banks to lend to home-buyers under their Funding for Lending Scheme.

Another government scheme, Help to Buy, remains in place to provide a guarantee for low-deposit mortgages.

Howard Archer, an economist with IHS Global Insight, said the data would fuel concern about a new property bubble and a fall in lending to companies outside the financial sector was disappointing.

"We believe that it is very important that the Bank of England has indicated that it is prepared to take further action to rein in the housing market if prices rise markedly amid ongoing strengthening activity," he said.

BoE Governor Mark Carney warned this month that Britain's housing market has a history of moving "from stall speed to warp speed". He and other BoE officials have stressed they have a range of tools, other than higher interest rates, to rein in the property market if needed.

The central bank has stressed it is in no hurry to raise interest rates as it tries to get Britain's economic recovery on a firmer footing.

The BoE expects inflation pressures to remain muted as companies get more out of existing staff rather than hire new workers in response to the recovery.

But data on Friday showed output per hour worked fell 0.3 percent in the third quarter after showing its first increases in nearly two years in the previous two quarters.