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Rate rise will not cool property prices

The housing market will continue to boom, which is bad news for first time buyers trying to get a foot on the property ladder

The Bank of England’s latest increase in interest rates may have been intended to calm the UK property market but a new survey has found it will make no difference to expected rises in house prices. What’s more, the rate rise will hit first time buyers hard.

Yorkshire Bank’s latest Housebuyers Survey, which polls more than 2,000 adults nationwide, reveals that rather than significantly dampening property prices, all that rate rises in 2004 look likely to do is squeeze determined buyers’ already overstretched finances even tighter.

We’ll still be house hunting this year

Nearly three out of four housebuyers admit they expect further interest rate rises this year, yet their determination to move house in 2004 is undiminished. Indeed the number of people intending to buy a house in the next 12 months has increased from 11% last quarter, to 14%.

In London, one in five people are intending to move house this year.

First time buyers get desperate

Yorkshire Bank is warning this latest hike is leaving first time buyers with fewer options for shelter from rate rises, and many look set to go to desperate lengths to secure their first home.

Geoff Greer, Yorkshire Bank’s chief operating officer, says: “Our new year survey shows the pressures are really beginning to bite. First time buyers seem to be hardening to the situation and taking more risks to afford their first home. Compared with the average housebuyer, they’re more likely to consider skipping getting a full survey on a property to avoid stretching their finances further.

“They’re also less likely than the average buyer to go for a slightly more expensive fixed rate mortgage, despite the shelter it would provide from further rate rises. And in their desperation to get on the property ladder, many are prepared to leap in immediately with an offer at, or above, the asking price.”

There may be trouble ahead

This behaviour will lead to many first time buyers coming a cropper in the years ahead. They could end up with a mortgage they cannot afford if their personal circumstances change or they may find they own a house with severe structural defects that a full survey would have detected.


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Please note that articles on this site do not constitute regulated financial advice, which recommends a course of action based upon the specifics of your personal circumstances. The articles are intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances. Call 0800 085 3250 for details of IFAs in your local area. Any statement regarding financial services products and tax liability is based on legislation and tax practices as at 1 January 2004, which is, of course, subject to change.The value of any tax benefits or reliefs depends upon the individual circumstances of the investor.When investment performance is mentioned you should remember that past performance is no guarantee of future performance. Where products have an underlying investment content, in many cases the value of the investment can fall as well as rise. For with-profit based investments, there is no guarantee as to the level of bonuses that will be declared, if any. Where mortgages or secured loans are explained do remember that your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it. All mortgages are subject to underwriting, status and are not available to people under the age of 18.

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Schedule of Articles

property investing
property refurbishment
buying overseas property
moving house
home letting
buy to let
home improvements

top 10 celebrity areas
6 up & comming areas
5 signs that an area is up & comming
city types yearn for the country in town
your place in the sun
equity release
planning permissions & extensions
estate agents
rent or buy
buy to let
mortgage overpayment
mortgage endowments
mortgage protection
stamp duty
self build your home
electrical surveys
the cost of moving in
the perfect neighbourhood
council tax
house price league
good neighbours
stamp duty land tax
top 20 towns 2003
cut the cost of moving
interest rates
buying in scotland
dream homes
first time buyers
the worth of uk homes
bad estate agents
keeping up appearances
home improvements


Please note that articles on this site & any other 'planning-approval' related web site does not constitute professional advice. All articles are intended to provide a general view of many subjects. We suggest you to consult a solicitor before making any important decisions.  The author is not an expert in any given field.

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