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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