The Bank of England’s Monetary Policy Committee (MPC) announcement on Thursday that interest rates were to increase by .25% to 5.75% has not been welcomed by several property businesses, with one industry leader warning that it would make buy to let investors more cautious.
David Bexon, Managing Director of SmartNewHomes.com, said: “I am appalled by today’s decision to further increase interest rates. Has the Governor forgotten that the ordinary home owning public is already stretched to capacity and will struggle to pay these escalating mortgage payments?
“First time buyers are staying away in droves and even buy-to-let investors are being more cautious. The MPC has ignored vital warning signs, failing to recognise that the market can simply not sustain another rate rise at this time.”
David Stubbs, senior economist at the RICS said: "This latest increase will further dampen housing demand. Someone with a £100,000 mortgage who is coming off a 2 year fixed rate deal in the next few months will face an increase of around £100 in their monthly repayments.
"Furthermore, this may not be the end of the pain. With economic growth strong both at home and abroad, a resilient housing market and elevated inflation expectations, it is likely that the Bank of England will choose to push interest rates up again in the coming months."
Robert Bryant-Pearson, Chief Executive of Allied Surveyors, said: “Borrowers who took on a mortgage in the years leading up to 2006, roughly calculating their affordability on a 5% ceiling are now stretched to capacity and are in severe danger of a debt crisis.
“With the threat of repossessions now paramount in the market and buyer confidence falling to an all time low, I urge the MPC to think very carefully ahead of next month’s decision to ensure stability in the market.”
Stuart Law, Managing Director of Assetz, a property investment company which sources sUK and overseas property, said: “Although the latest rise was widely predicted by economists, many of us believed it was entirely unnecessary in light of recent inflation figures.
“Demand is such in this country that growth in the housing market will continue to be robust in spite of the latest rise, and will continue at 7-10% for the year. A further raise however would perhaps be one too far, and could begin to slow growth in the residential market.
“ While an increasing rental demand favours buy-to-let investors, the rising costs are now persuading them to look away from residential lets for higher yielding properties in the commercial and holiday sectors.”
