12.08.201403:37:36UTC+00Rising mortgages make UK rate hikes more likely

Latest data showing a rise in mortgages taken out is believed to bear down on the Bank of England (BoE) as it decides on the proper timing of when to hike up its benchmark rates.

According to a survey responded to by UK’s largest money lenders conducted by the Council of Mortgage Lenders (CML), there was a 4% increase in the number of mortgages taken out during the month of June from the amount in May. The 60,500 loans for house purchases were worth a total of £10 billion to achieve a 6% climb in value over the previous month. Almost half of those, or 28,600, could be credited to home movers with first time buyers posting a significant month on month increase.

Markit’s chief economist Chris Williamson believes that the housing market’s posting of more positive data could weigh down heavily on the central bank’s decision to increase rates. Current interest levels at a historical low are believed to have contributed to the rise as more buyers are attracted to the 0.5% rate. He adds that,  "A few more months of data showing the property market is booming and double-digit price growth will add to the pressure on the Bank."  

Governor for the BoE Mark Carney is set to make a statement tomorrow to reiterate the need to control prices from rising unabatedly and acknowledge the risk that a crash in house prices brings to the overall recovering economy of the UK. The governor had previously showed his support to roll out stricter affordability tests as part of the regulatory tool set.

Additional data from the CLM says that first time buyers borrowed an amount on average 3.47 times their gross income compared to 3.46 times in May even as gross household income increased to £37,000 from £36,500.