According to recent reports, the rise in interest rates has put more than half of UK homeowners off the idea of climbing the property ladder. For many, this was the first time they have even experienced a change in interest rates since buying a property, particularly in the 25-35 age range and those living in London or the North East. This might explain why many have decided to cancel or postpone their next house move after the announcement from the Bank of England.
Interest Rate Reactions
Most people have said that they are yet to actually notice any difference in their mortgage payments, which is probably due to being on fixed rate mortgages. However, many have still decided not to buy another property for the time being. Predictably, it is first time buyers who are most nervous when it comes to the prospect of climbing the property ladder as many will be unsure of what is to follow.
Londoners also seem more deterred than others when it comes to moving house, where even small increases can affect affordability in a massive way. This is due to the extensive property prices that exist in the capital, causing many to take a cautious approach when it comes to property purchase.
With affordability remaining low, many homeowners feel that interest rates increasing by between 0.5% and 2% would put them off climbing the property ladder. Those aged over 55 would need to see the largest rises before being put off, possibly because of previous experiences in the property market. Once they have ridden out previous storms, changes and crashes, this latest increase will seem to be more of a minor inconvenience.
As interest rates have not shifted for some time, it may explain why many now feel that the length of mortgage agreements should be increased. A lot of homeowners are also fearful of variable rate mortgages and believe that they should be scrapped altogether. This is likely to be founded in a fear of unpredictability that could lead to sharp spikes in prices.
The reactions to this interest rate rise have been interesting, whilst also understandable. Those on the first few rungs of the property ladder are obviously nervous, finding themselves in this position for the first time. The older generation who have weathered previous storms are yet undeterred by the small rise which pales into insignificance compared with previous changes to the housing market.
This all goes to show that market confidence still remains high as whole, despite some obvious trepidation remaining amongst younger buyers who likely fear large and sudden rises in interest rates, causing them to remain cautious when it comes to progressing up the property ladder.
While interest rate changes will always make some nervous, this was neither a sudden nor unexpected change, and was kept small enough so as to not impact on the vast majority of people.