Possible rate rise 'puts off homebuyers'

03 November 2003
Predictions of a rise in interest rates this week have put people off buying a home, new research claims.

A survey by Alliance & Leicester found that the number of people planning to buy a property during the next two years fell to 12 per cent, down from 15 per cent in July.

The Bank of England's Monetary Policy Committee is widely expected to raise interest rates from their 48-year low of 3.5 per cent to 3.75 per cent at its November meeting.

However, Alliance & Leicester pointed out that, while the number of people planning to buy has fallen since the summer, it is still at the same level as October 2002, suggesting that the housing market remains robust.

Young buyers continue to drive demand, the survey indicated, with a quarter of people in their 20s looking to buy a house during the next two years, down from 30 per cent in July.

Paul Cooper, head of mortgages at Alliance & Leicester, said: "Rumours of a rise in base rates may be impacting on people's willingness to buy property but it is good to see that intentions to move have not declined year on year, which shows the continuing resilience of the housing market.

"The recent popularity of fixed rate mortgage products suggests that people may be expecting a rise in interest rates in the near future and are choosing mortgages that offer budgetary certainty for their monthly mortgage payments."

The main reason people gave for planning a move was that they wanted more space, with 17 per cent of people saying they wanted an extra bedroom, and 12 per cent looking for a bigger garden.