The  Council of Mortgage Lenders has warned of an interest rate rise from the Bank of England is more likely increasing costs to homeowners.

The number of mortgages approved by lenders has increased by 5% in June compared to June to 60,500 for the month according to the Council of Mortgage Lenders (CML).

By value the rise was 6% to £10 billion for the month to June and compared to this time last year the figure is 23% higher.

Increases in borrowing by homeowners places more pressure on the bank of England to take action to slow the market by increasing interest rates.

First time buyers increasing

The number of first time buyers is increasing month on month to 28,600 or 47% of all mortgage lending. The majority of all approved mortgages were taken out by home movers.

There are rising numbers of equity release mortgage buyers securing fixed rates typically from 5.9% upwards without any evidence of earnings, important for borrowers with only pension income.

First time buyers and home movers have benefitted from the government Help to Buy scheme that allows people to place a small deposit of only 5%.

The government has two versions of the Help to Buy scheme with an equity loan scheme where the government provides an interest free equity loan of 20% and a mortgage guarantee scheme where the government guaranteed the lender 15% of the property value.

Since launching the scheme in 2013 the mortgage market has increased significantly giving buyers more confidence and lenders introducing more product choice including mortgages requiring smaller deposits.

Data from the CML shows the average first time buyer has a borrowing multiple of 3.47 times their gross income in June and mortgages average £123,865.

Landlords keep buying

The CML have also said there is increasing demand for buy-to-let mortgages which have increased by 7,250 or 23% in the last year.

A total of 15,600 buy-to-let mortgages were approved to landlords with a value of £2.2 billion. In contrast the number of owner-occupier remortgage buyers has decreased by 8.2% to 23,600.

Usually warnings of interest rate rise would see an increasing in people remortgaging to lock in longer fixed term mortgage deals before the cost of borrowing increases.

Bank of England under pressure

As a result of the rise in mortgage lending last month, the Bank of England is under greater pressure to raise interest rates from their all time low level of 0.5%.

Governor of the Bank, Mark Carney, has been able to use regulatory powers to control the housing market such as tougher affordability tests or limits to the multiples lenders can offer

However, to prevent the market overheating and pushing the economy back into recession interest rates may have to increase.

What are your next steps?

Call our LCM mortgage brokers if you are a buy-to-let landlord with a property, remortgaging and want the best mortgage deal, buying your first home or you are planning to move home.

Start with a free mortgage quote or call us and we can take your details. Learn more by using the mortgage monthly cost calculators, property value tracker chart and equity release calculator.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your home to spend on anything such as pay for care at home or even help your children start or expand a business.

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