Mortgage lending achieves record high in June

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by Elaine Frei

According to figures from the Council of Mortgage Lenders (CML), gross mortgage lending accomplished a new record of £34.2 billion in June - up from £31.4 billion in May. Higher interest rates and the traditional spring pick-up in house-buying are thought to be responsible.

A spokesperson for CML commented that the market is feeling the effects after 5 interest rate rises in spite of the lending figures. This effect will be much more obvious in the short-term as homeowners with fixed-rate mortgages move to a drastically higher interest rate.

CML anticipates one more interest rate rise before the end of 2007, The Bank of England’s Monetary Policy Committee consider the effects of past rises on inflationary pressures before taking further action. Meanwhile, it would be prudent for borrowers to think seriously about their increased repayments when their fixed-rate deal expires this year.

A spokesperson for the Building Societies Association (BSA) mirrored concern, urging potential borrowers not to overstretch themselves.

Against a backdrop of huge UK consumer debt - the highest in the European Union - those on high-multiple mortgages (products that allow borrowing of 4 times salary or more), are most vulnerable to an increase rise in interest rates.