Interest rate changes ‘major worry’ to buyers

The impact of May’s interest rate rise is to dampen property affordability, one industry expert has suggested.

According to Howard Archer, chief UK and European economist for Global Insight, the Bank of England’s decision to increase the base rate to 5.5 per cent will see consumers – and in particular first-time buyers – to struggle even further to meet property deposit costs and secured loan repayments.

He claimed: "Furthermore, we believe that interest rates will rise by a further 25 basis points to 5.75 per cent within the next couple of months, which will be a major worry to potential house buyers."

Mr Archer added that although the base rate could even reach six per cent before the end of the year, property prices will fall "only gradually".

Meanwhile, consumers were reported to be leaning towards Secured Loans ahead of credit cards as a more competitive way of financing their spending.

The Global Insight economist’s comments follow research from the Bank of England indicating that 107,000 mortgage approvals were made over April, the lowest figure recorded for 12 months.

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