High interest rates 'to impact on mortgage market'

Gross mortgage lending reached an all-time high of £34.2 billion in June - up from £31.4 billion in May, the Council of Mortgage Lenders (CML) has announced.

The amount of money being lent has risen as a response to high interest rates and despite the fact that the CML, the Building Societies Association (BSA), and the British Bankers’ Association (BSA) have all released figures that indicate that the property market is slowing down.

While borrowing may be higher than ever, lending rose by just nine percent from May to June, down from 12 percent in 2005 and 15 per cent in 2006.

CML director general, Michael Coogan, said: "There are signs that the market is feeling the cumulative effects of the five interest rate rises we have seen over the past year.

"This effect will become much more evident in the coming months as borrowers with fixed-rate mortgages come off their existing deal into a significantly higher interest rate environment."

BBA figures also showed lending rising more slowly in June and BSA data shows a dramatic fall in the number of mortgage approvals.

Brian Morris, of the BSA, warned: "Borrowers should be careful about overstretching themselves at this time of rising interest rates and take on new borrowing only if they are sure they can afford to service it."