Record mortgages defy rate hikes

19-07-2007

Record mortgages defy rate hikes
Mortgage lending hit a new high of £34.2 billion in June despite recent interest rate rises, according to the Council of Mortgage Lenders (CML).

The record figure represents a nine per cent increase on May's £31.4 billion but does not match the 12 per cent and 15 per cent rises seen in June 2006 and 2005 respectively.

The CML said the rise reflected seasonal trends but was also influenced by borrowers' response to the five quarter-point hikes in interest rates seen in the last 12 months from the Bank of England.

It acknowledged the current strong levels of lending, fuelled by a growth in the number of borrowers partly caused by higher numbers exiting short-term fixed-rate deals, but warned that the market was being affected by the Bank's battle against inflation.

"Despite the record level of mortgage lending, there are signs that the market is feeling the cumulative effects of the five interest rate rises we have seen over the past year," CML director general Michael Coogan said.

He explained that borrowers coming out of a fixed-rate deal later this year could be adversely affected by the trend, warning them to "seriously" consider their options.

"While the markets still expect one more interest rate rise before the end of the year, we believe the monetary policy committee should carefully assess the impact of past rises on inflationary pressures before it takes further action," Mr Coogan added.

"In the meantime, borrowers should be thinking seriously about how they will afford higher mortgage payments if they come out of a fixed-rate deal this year."


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