Rates up again
But what effect will this have?
The 6 May decision of the monetary policy committee (MPC) of the Bank of England to raise interest rates by a quarter of a point to 4.25 per cent was predicted by many market experts, from economists to brokers. But what will this rate rise do for the housing market? The general feeling seems to be that this move will yield positive results.
Andrew Frankish, operations director of leading mortgage broker Mortgage Talk, is of the opinion that the rise could be a stabilising force. ‘The Bank is acting to try and dampen the runaway house inflation that we have seen throughout the UK’s property market over the last three years,’ he says. ‘Only last year, experts were arguing that house price inflation would slow down to a crawl, and that we might even start to experience the first signs of a housing crash. This has manifestly not happened, and the MPC needs to take steps to bring to housing sector back in line.’
Peter Bolton King, chief executive of the National Association of Estate Agents (NAEA) sees the decision as neither unexpected nor damaging. ‘Whenever the Bank of England puts up rates inevitably a sense of uncertainty is created,’ he comments. ‘However, we have been saying from the start of the year that rates were likely to climb to around 4.75 per cent by the end of 2004. That in itself will not damage the housing market because we know affordability is healthy in historic terms. The last quarter-point hike did not affect the market one jot and we don't believe this rise will have any material effect except perhaps on first time buyers who will be further overstretched.’