Northern Rock optimistic about mortgage market

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Northern Rock optimistic about mortgage market

The chief executive of Northern Rock has given an optimistic prediction for the UK mortgage market this year, forecasting healthy lending throughout 2007 despite higher interest rates.

Figures from the Council of Mortgage Lenders show that Britons borrowed record amounts on mortgages in December, despite interest rate rises in August and again in November.

Another rise in January bought rates to 5.25 per cent, but Adam Applegarth told BBC Radio 4's Today programme that he does not expect this rise to slow the growth in the mortgage market.

He said that while the number of people taking out new mortgages may fall as a result of increased lending costs, the number of homeowners looking to remortgage will rise, and so the gross mortgage market will continue to grow.

"If interest rates increase significantly, let's say from 5.25 per cent to 6.25 per cent, you may see the house moving market a little quieter but there is a bigger incentive for people to refinance at the ends of their deals. So the remortgage market will actually be a little bit higher," he explained.

"Add the two together and I think you can expect to see a gross mortgage market of £350 billion next year."

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