Despite June boasting record levels of mortgage lending, much of the market growth was a result of re-mortgaging, the British Bankers' Association has reported.

Over the course of the month, gross lending was up to £21.5 billion, just a five per cent increase on the previous year and an indication that the growth of lending is stalling.

In addition, the BBA found that 193,850 mortgages were approved in June, an eight per cent decrease on the year before, with higher costs being cited as the major factor behind the decline.

David Dooks, director of statistics at the BBA, said: "Although the trend in net mortgage lending is being maintained, approval numbers for house purchase are well down on this time last year, suggesting that market demand may be reacting to higher mortgage costs."

The findings come as property experts widely predict that interest rates will be put up to six per cent in the next few months, with annual inflation still above its target despite recent improvements.