Mortgages: Interest rate increases hit mortgage borrowing

Richard Catlin
03 September 2007

The number of approved mortgage loans in July fell to the lowest level since March - a drop of 1% on July 2006 - but the number of re-mortgages saw a year-on-year increase of 12%.

Borrowing levels in the month were £21.5bn - a 6% reduction on June, but numbers were boosted by the increase in the number of consumers choosing to re-mortgage.

There are claims that this provides further evidence of a cooling in the housing market, and coincides with a reduction in unsecured credit card debt - falling £82 million in the month.

House price growth slowed in August, and it is predicted that with banks tightening up their lending policies in the sub-prime sector, lending levels will be kept in check well into 2008.

There have been five interest rate increases in less than 12 months, but the drop in borrowing is actually less than expected, and reflects a traditional seasonal low. As such, economists are predicting that further interest rate increases are possible in the near future.

It is thought that many homeowners are seeking to get better deals now, fearful of further rate increases that would stretch their monthly commitments to breaking point. As fixed rate deals come to an end and homeowners start to feel the pinch, they are increasingly shopping around for a cheaper mortgage.

If you're worried about your own existing mortgage deal, it can't hurt to see if you could save money. We recommend you try an independent broker You can also use checkmyfile to check how the house prices in any postcode have changed recently for free using our free Neighbourhood Search Service - you'll also be able to see what the average cost is for each type of housing.

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