House prices boom to continue, says mortgage lending chief

House prices may not have hit a peak and are set to carry on booming for the rest of the year, according to the head of the mortgage lending industry.

Michael Coogan, the director general of the Council of Mortgage Lenders, said there was no slowdown under way, adding it would be a mistake to seize on one month's figures. "I can't say we have reached a plateau and started to slow down," he said.

He said the housing market was fundamentally strong but would eventually return to more sustainable levels as fewer new buyers could afford to buy homes.

Last month the Halifax bank highlighted a turn in the market on the back of the slowest price growth for a year in August. This was backed by two estate agents' surveys and a report from the surveyors industry but was contradicted by the Nationwide building society.

But Mr Coogan said: "One of the things I have learnt more and more in this job is that you cannot look at one month's figures and judge anything." He said gross mortgage lending had now probably risen closer to £210bn compared with a recent estimate of £200bn, £160bn a year ago and £100bn in 2000.

"The [mortgage] approval numbers we have highlighted over the last two or three months are going to show several more months of high activity," he said. "In those terms the slowdown has not yet happened. If you look at all the signs, confidence in terms of activity and wanting to be in the market, I think the market will continue to be buoyant," he said, although he acknowledged buyers were showing "signs of caution".

The CML already expects a slowdown with annual house price inflation falling from 20 per cent now to 16 per cent by December and 8 per cent by the end of 2003.

Mr Coogan hit the headlines three months ago when he was criticised by some major lenders after taking the unprecedented step of calling on the Bank of England to raise interest rates to quash the housing boom before it became a bubble that burst with the disastrous consequences seen in the 1990s. But he said he was unrepentant although he agreed rate increases were now off the agenda thanks to the change in the global economy.

"The purpose of the comments was to say to the Bank and more generally that for the first time for quite a while the housing market was going to have a potential inflationary impact. But behind that there was a message that had to get out widely to borrowers that they had to be careful about the commitments they were taking on," he said.

Concern about debt levels is mounting and a government task force is expected soon to highlight concerns over "irresponsible borrowing".

Mr Coogan also laid out his stall ahead of November's pre- Budget report and next year's Budget, calling for reform of stamp duty and help for first-time buyers. The CML is also concerned by the housing shortage and believes this should be tackled in the Budget.

Mr Coogan said the threshold for stamp duty should be raised from £60,000 as rising prices meant a million extra first-time buyers would be caught by the tax by next April. "It is a barrier to home ownership," he said. The CML also wants schemes to bypass the affordability issue for first-time buyers by enabling to them to get a mortgage for, say, a half share in the property.