MORTGAGE lending remained strong last month as homeowners sought out better deals to protect against rising interest rates, figures indicated today.
The Council of Mortgage Lenders (CML) said £34.4 billion was lent by its members during the month, compared with £34.8bn in June.
Although down slightly month-on-month, the figure was 13 per cent higher than the £30.6bn recorded in July 2006. The
annual leap came in the face of five interest rate hikes in the past 12 months.
The CML said lending is currently being fuelled by a large number of people remortgaging to better deals in the belief that rates will go higher still.
But it predicts a more pronounced slowdown in the autumn as the effect of interest rate hikes take hold on household budgets.
Nonetheless, CML members are still on target to reach a record £360bn of mortgage lending during 2007, it added.
The British Bankers' Association (BBA) said figures for July were "surprisingly" strong.
Its members reported that net mortgage lending rose by £5.7 billion, higher than last month's £5.4bn. David Dooks, director of statistics at the BBA, said: "Longer-term trends in mortgage lending are little changed but July's strong rise was surprising, given the expected cumulative impact of higher interest rates.
"The resilience shows the popularity of home ownership and also reflects more remortgaging activity."
Building societies were less upbeat, with figures for July showing a year-on-year fall in gross lending and a drop in approvals.
Net advances during the month shrunk to £598 million, compared with £1.66bn a year earlier, the Building Societies Association (BSA) said.
Adrian Coles, director-general of the BSA said. "As mortgage payments increase, household finances are likely to be squeezed further.
"Even if interest rates are near their peak, potential borrowers need to think about all of their outgoings to make sure they do not overstretch themselves financially."
Figures showed that consumer credit in the UK remains weak, in an indication that household budgets are feeling the strain.
British banks said that underlying credit card borrowing fell by £0.1 billion in July, while loans and overdrafts increased by £0.2 billion.
David Marshall, a business analyst with the Edinburgh Solicitors Property Centre, said the housing market in the Capital was still growing steadily.
However he predicted the city will follow the national trend and experience a slowdown by the end of the year.
He said: "We are continuing to see steady growth in Edinburgh and the market has been very strong over the past few months.
"The recent interest rate rises have not yet begun to affect the property market, as there is usually a delay before they start to hit buyers and lenders.
"However, people who took out fixed rate mortgages two years ago are starting to feel the strain now that their mortgage deals are changing to higher repayments.
"Although there is still a high demand for properties in the city, we are expecting the market to cool and slow down towards the end of the year."
