Rate raises slow mortgage market

Mortgage borrowing is slowing down, following rises in interest rates, according to the Council of Mortgage Lenders (CML).

While borrowing reached a record of £30.6 billion in May, the growth last month was the lowest so far this year.

In the earlier months of 2007 there was a growth of month on month lending of up to 15 per cent but the figure for May was only 12 per cent higher than in April.

However, the CML continues to expect continued growth in the market.

CML director general Michael Coogan said: "Going forward we expect lending to ease as we progress through the year, but the market will remain in good shape.

"Although further interest rate rises will continue to dampen demand, we are still on course to meet our prediction of a record £360 billion of lending during 2007."

News of the slowdown was also echoed by the Building Societies Association (BSA), which reported that new lending fell year on year by 17 per cent. The number of loans that have been approved but not yet made fell 13 per cent year on year.

Adrian Coles, director-general of the BSA, said: "The rate rises have provided sunnier news for some savers, although many households are not able to take advantage of better rates as higher rates mean paying more on debt."