Borrowing cost hikes ‘starting to bite’

Increases in the cost of borrowing are starting to have a real impact on the activities of consumers across the UK, recent research has suggested.

With millions of British consumers struggling to become debt free, the amounts being lent by mortgage providers have fallen considerably after five rises in the cost of borrowing since August of last year.

The value of home loans fell by 12 per cent from August to September, which is more than double the typical drop for this period, the Council of Mortgage Lenders (CML) has revealed.

A statement from the CML explained: “This easing in the market is another sign of the expected consumer response to the five interest rate rises experienced since August 2006.

“In the coming months, we expect to see monthly lending levels dip below their 2006 levels for the first time this year as rate effects are exacerbated by the recent liquidity problems in the mortgage market.”

More evidence of Britain’s debt management woes was revealed this week with the Shelter charity showing that a million people across the country have used their credit cards to pay rent or to meet mortgage repayment demands.