Higher interest rates hit lending

Commenting on the mortgage market, Brian Morris, Head of Savings Policy at the BSA (Building Societies Association) said: “The slow start to the summer has continued. Although 2007 started strongly, it seems the impact of successive interest rate rises is now being felt and is affecting affordability. Typically, building societies are maintaining robust lending criteria and this is a possible explanation of the recent slowdown in building society lending.

“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.

“With many commentators expecting another rate rise soon, lending may well cool further over the remainder of the year and into 2008.”

Commenting on the savings figures, Mr. Morris said: “In the second quarter of 2007, net receipts into savings accounts at building societies grew by 10.6% over the same period last year. This is partly because of some relatively low levels of saving in the late spring last year, but may also reflect higher rates of interest on accounts following the rises in the Bank Rate.

“However, the inflow in June was 12.3% lower than a year earlier. This suggests that households are finding their finances increasingly tight and that despite the higher rates of interest available, they are having difficulty saving.”