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CML warns borrowers over rises in rates

Mortgage borrowers should take steps to ensure themselves against increases in interest rates and rising unemployment over the coming year, says the Council of Mortgage Lenders.

Following a £1.4bn fall in gross mortgage lending last month, the CML says borrowers should ensure they are able to make mortgage repayments if the global slowdown means they lose their jobs.

CML director-general Michael Coogan says he expects the housing and mortgage markets to grow less strongly than last year, when lenders advanced a record £161.5bn for house purchases.

CML figures show gross advances fell to £14bn in December from £15.4bn in November while the value of loans for house purchases fell to £8.4bn from £9.5bn. Remortgaging also fell to £4.4bn from £4.8bn.

However, average new mortgage rates fell for the fifth successive month, dropping to 4.68 per cent from 4.83 per cent in November. The average new variable mortgage rate was 4.38 per cent, with the average new fixed rate 5.19 per cent.

Coogan says: “The cuts in interest rates during recent months have helped to offset any adverse impact following September 11.

“However, small rises in interest rates and higher unemployment are expected. Borrowers need to think about how this may affect their household finances and whether they need to cover their mortgage payments if they lose their jobs.”

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