Interest rate rise to have “marked impact”
Almost a month since the Bank of England's surprise decision to up interest rates, analysts are starting to get a feel for its effect on the property market.
Roger Bootle of Capital Economics predicts the 0.25 per cent interest rate rise will have a "marked impact" on mortgage demand.
He said: "It is possible that the market might shrug off the quarter point rise in interest rates, especially if it was seen as a one off.
"But the door was left open for further increases, this might trigger a marked drop in mortgage demand."
However, he cautioned homeowners: "There is no danger of a property market crash though."
The economist predicted that the interest rate rise could take the proportion of take-home pay absorbed by a new mortgage to "within a whisker of its mid-2004 highs".
He added: "Over the past two years, affordability has been broadly stable and, if anything, improved marginally.
"Although, it is impossible to be certain where the affordability ceiling for a typical household lies, the pattern of housing market activity over the past two years suggests to us that affordability may already be at, or very close to, the top of households' comfort zone."
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