Rising rates biggest homebuyer concern, survey reveals

Rising interest rates are perceived as the single biggest risk to the housing market next year, research from the Building Societies Association suggests.

In its Property Tracker report for 2013, the BSA found that more than one in four of 2,000 adults surveyed listed rising interest rates as their largest housing concern for the year to come.

Consumers are also more worried about the affordability of monthly mortgage repayments than they were three months ago, with 46 per cent of people saying that this is now a barrier to property purchase. This number is up by 11 per cent on September 2013, which the BSA says reflects concern about the rising cost of living and an increase in energy bills.

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First-time buyers are feeling more optimistic compared to three months ago, the research suggests. Despite raising a deposit remaining the largest barrier to owning a home, the number of people who believe this is the case has fallen by a third, from 66 per cent to 44 per cent.

The BSA speculates that publicity around the government’s Help to Buy schemes has helped increase confidence amongst first-time buyers.

Paul Broadhead, head of mortgage policy at the BSA, said: “It is understandable that consumers are wary about a rise in interest rates in 2014, but unless the pace of economic recovery picks up considerably, it is unlikely we will see the bank base rate rise over the coming twelve months, and when interest rates do rise, it is likely to be gradual.

“There remain plenty of options for a homebuyer to get greater certainty over their mortgage repayments with 69 per cent of the mortgage products available on the market now at fixed rates.

“When consumers apply for a mortgage, most lenders will also check that it is affordable were interest rates to rise, which should provide some comfort for homebuyers, though it may mean they can borrow less than they anticipated.

“It is encouraging that first-time buyers are feeling more confident about the housing market. Publicity surrounding government schemes will have helped, alongside the increase in supply of lower-deposit mortgages. We would urge consumers to shop around if they do have a smaller deposit, as there are excellent deals to be had outside the Help to Buy Scheme.”