New figures show that homeowners searching for better deals to protect themselves against future interest rate hikes helped keep mortgage lending robust in July.

According to the Council of Mortgage Lenders, its members lent £34.4bn during the month, compared with £34.8bn in June.

While the figure is slightly down month-on-month, it is 13% higher than the £30.6bn which was lent in July 2006.

The annual leap comes despite the fact that the Bank of England has increased interest rates five times during the course of the last 12 months.

The CML said lending is currently being stimulated by a large number of people remortgaging to better deals in the belief that rates will go higher still.

But it predicts there will be a more pronounced slowdown in the autumn as the effect of the interest rate hikes begins to eat into household budgets.

Even so, the organisation believes its members are still on target to reach a record £360bn of mortgage lending during 2007.

The British Bankers' Association said the figures for July are "surprisingly" strong.

Its members reported that net mortgage lending rose by £5.7bn, higher than last month's £5.4bn.

David Dooks, director of statistics at the BBA, said: "Longer-term trends in mortgage lending are little changed but July's strong rise was surprising, given the expected cumulative impact of higher interest rates.

"The resilience shows the popularity of home ownership and also reflects more remortgaging activity."

However, building societies were not so fortunate in July, with figures for the month showing a year-on-year fall in gross lending and a drop in approvals.

Net advances during the month shrunk to £598m, compared with £1.6bn a year earlier, the Building Societies Association said.

Adrian Coles, director-general of the BSA, said: "As mortgage payments increase, household finances are likely to be squeezed further.

"Even if interest rates are near their peak, potential borrowers need to think about all of their outgoings to make sure they do not overstretch themselves financially."

Figures show that consumer credit in the UK remains weak, in an indication that household budgets are feeling the strain.

British banks said that underlying credit card borrowing fell by £100m in July, while loans and overdrafts increased by £200m.

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