Concerns that rate rise could dent buyer confidence

Estate agents were relatively sanguine as the Bank of England raised interest rates for the first time in a decade yesterday – but were concerned that the hike could impact on buyer sentiment.

The Bank of England’s Monetary Policy Committee increased the base rate from 0.25% back up to 0.5%, the same level as in July 2016 before it was cut the following month.

Many agents said the rise was not too much of a surprise, but there were concerns about buyer confidence amid speculation of future rate increases.

David Westgate, group chief executive at the Andrews Property Group, said: “This has been mooted for a while now and, in my opinion, is actually long overdue.

“In the aftermath of the financial crisis, it made sense that rates should be kept low in order to drive activity in the market. That was, however, ten years ago and the time is now right to start readdressing rates.

“Given that this is a relatively small increase in the base rate, its impact to most borrowers should be nominal and, assuming they have planned appropriately, relatively easy to adapt to.

“What the industry needs to ensure, however, is that it works to stem any knock to confidence amongst consumers that this announcement brings.

“Simply hearing news of a rate increase will lead some people to reconsider their financial and property decisions, and whilst this is understandable in some respects, these decisions should only ever be made based on personal circumstances and with at least a medium- if not long-term view.

“When taken in this context, the rate increase should not have any impact on the property market.”

However, Andrew Ellinas, director of London agents Sandfords, warned that while a 0.25% rise is not going to have a significant impact on the economy, it will further depress a falling property market, particularly in prime central London.

He said: “Currently, the market is flat.

“There are two main reasons for this. The first is that they are overpriced. Vendors still believe that values are what they were two years ago. I called the top of the market just over a couple of years ago and it has been drifting down ever since, with a bit more yet to go.

“With so many tax changes (increased Stamp Duty, an extra tax for buy-to-let investors and foreign investors’ tax) and Brexit looming, there is too much uncertainty, and buyers, particularly overseas investors, have been put off making big financial commitments.”

Others said the property market now needed a confidence boost.

Paul Smith, chief executive of haart, said: “With more stringent borrowing criteria in place we do not see very small increases in interest rates as being a significant impediment to the market. But this rise does show that rates could nudge up in future.

“A far bigger threat to the stability and health of the housing market is the punitive levels of Stamp Duty which the Chancellor should address as a top priority in his budget later this month.”


Written by: Houseladder