It appears that rising interest rates have had little impact on the UK property market, as the British Bankers Association has revealed that mortgage lending in July 2007 increased by £13.6bn. The figure is almost exactly in line with the previous six-month average of £13.7bn and represents a slight increase from June’s increase of £13.1bn.

July’s increase is not what the organization expected, with BBA chief statistics officer David Dooks admitting the increase was “surprising” after the cumulative effect of recent interest rate hikes. He added: “The steady growth in UK home lending despite five interest rate increases highlights the popularity of home ownership,” but Dooks also noted that much of the advanced total figure could be due to the remortgage activity as homeowners seal the property. rate offers to minimize the impact of interest rate hikes.

Those five increases over the last year have prompted many homeowners who currently have fixed-rate deals due to frantically compare mortgages currently available on the market in an effort to find one that will ease the rate increases. Homeowners with a £100,000 mortgage currently on fixed-rate deals taken out two years ago could face a monthly increase in the region of £200 per month if they were to move to the variable standard rate; therefore, the need to find a new discount or fixed rate mortgage is proving quite critical for many families. That immediate need is what most experts believe is driving the current mortgage boom.

The Council for Mortgage Lending (CML) recently announced that total gross mortgage lending reached a new record for the month of July at £34.4bn, reflecting the trend highlighted in the BBA figures. The CML readily admits that they attribute the buoyancy of the market to the remortgage effect and do not expect the fall numbers to be that high. Despite that, the CML is still predicting a record £360 billion in home loans for the year ending 2007. That’s at least partly due to the fact that more and more fixed-rate mortgages [http:/ /www.moneynet.co .uk/mortgages/index.shtml] will return to the standard variable rate in the coming months.

However, the Royal Institute of Surveyors (RICS) has noted that recent volatility in global markets, including the collapse of the US subprime mortgage market. The organization’s chief economist, Simon Rubinsohn, warned: “With 90% of borrowers currently opting for fixed-rate deals, those already financially strained will pay an even higher bba price for peace of mind.”

So even though home lending is still at record levels, it’s mostly because homeowners are looking for new fixed-rate remortgage deals. It appears that interest rate increases designed to slow the economy are having the desired effect, even if they take time to work their way through the system.