Strong lending 'will add to rate concerns'

Strong figures from the Council of Mortgage Lenders (CML) will add to the monetary policy committee's conviction that another rise in the base interest rate is necessary, according to the Royal Institution of Chartered Surveyors (Rics).

June was a record month for home loan lending, according to the CML, with £34.2 billion going out to borrowers, compared to £31.4 billion in May.

While they are not surprising, the figures suggest that borrowers are still prepared to take on high levels of debt and will be of concern to the Bank of England, Rics said.

"With less than 50 per cent of the increase in base rates over the past year being passed on to mortgage borrowers (via the effective mortgage rate) it is not surprising that mortgage lending has remained so strong during the seasonally strong summer months," Oliver Gilmartin, senior economist with the group, commented.

"Record borrowing levels will only add to the concerns at the Bank of England that higher interest rates will be necessary to curb consumers' appetite for debt."

While mortgage deals are beginning to become more costly for borrowers, Mr Gilmartin said that the strength of the employment market will continue to underpin the housing industry.

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