FTA Vantage Point: Interest Rates  

Britons fear rate rises will dash their property dreams

Britons fear rate rises will dash their property dreams
Young people are especially worried about rising rates. Photo: Ron Lach via Pexels

Britons are increasingly worried about rising interest rates, fearing it will damage their chances of getting on - and staying on - the property ladder.

According to Market Financial Solutions, which commissioned pollster Opinium to survey more than 2,000 UK adults, both homeowners and renters fear the twin threats of rising rates and high inflation will dash their property ownership dreams.

Some 28 per cent of renters told MFS that rising interest rates were damaging their chances of getting onto the ladder, while 19 per cent of homeowners admitted that a higher base rate would damage their chances of affording their mortgage payments.

Paresh Raja, chief executive of MFS, said: “The dual threat of rising inflation and rising interest rates will, naturally, have serious ramifications on those looking to get onto or move up the property ladder.

"As the cost of borrowing increases, homebuyers will need to consider the budgets carefully and assess their options."

As reported by FTAdviser, the Bank of England increased the base rate from 0.1 per cent to 0.25 per cent in December 2021, before introducing a further hike to 0.5 per cent in January this year. 

But while MFS's research showed that 18 per cent of UK adults intended to buy a home in 2022, with 14 per cent of renters hoping to buy their first home - 66 per cent said they were worried about inflation and rising house prices.

Some 38 per cent said that the time and complexity now involved in securing a mortgage is a major challenge when looking to buy a property.

The research also found:

  • 28 per cent of UK renters say interest rates hikes pose a significant threat to their prospects of getting onto the housing ladder.
  • 19 per cent of current homeowners say further increases in interest rates would damage their ability to repay their mortgage.
  • 18 per cent of UK adults intend to buy a property in 2022.
  • 66 per cent are worried that rising inflation will ruin their chances of doing so.
  • Among existing homeowners, 14 per cent plan to sell and move home in 2022, while 6 per cent hope to purchase an additional investment property.

Raja added: “Mortgage brokers will continue to play an important role in vetting viable options for homebuyers.

"But it is important that any buyers – from first-timers to seasoned investors – weigh up their options, particularly with many citing mortgage delays and complications as major issues in the process.

"Seeking the right financial product is important, but finding the right lender who can support their needs and act quickly is vital."

House price rises

The research came as the Nationwide House Price Index showed yet another increase in the average price, despite the pressures of Brexit, inflation, and the invasion of Ukraine heightening geopolitical risks.

As reported by FTAdviser, the Nationwide HPI revealed:

  • Annual UK house price growth increased to 12.6 per cent in February, from 11.2 per cent in January.
  • Prices up 1.7 percentage points month-on-month.
  • Average house price exceeds £260,000 for first time.
  • Price of typical home is 20 per cent higher than February 2020.

 According to Michael Bruce, chief executive and founder of estate agent Boomin: “We’re riding a wave of house price growth at present, driven by a market that is experiencing very high demand for homes that just simply aren’t available.

"It’s only natural that this wave will start to lose ferocity at some point, but there’s certainly no signs of that happening just yet, despite a squeeze on the cost of living and a double-digit increase in interest rates.”

Jonathan Samuels, chief executive of property adviser Octane Capital, agreed. He said: "Although two consecutive increases in interest rates is always going to be food for thought for the nation’s home buyers, what we’re currently seeing is consideration, not concern.