12 Jul HOUSE PRICES WILL NOW FALL HARDER DUE TO TODAY’S MORTGAGE RATE RISE
HOUSE prices will fall harder and faster as mortgage rates hit a new high, a leading national property association has warned.
Reports today reveal mortgage rates have soared to their highest rate for 15 years meaning an average two year deal has hit 6.66%.
Commenting on the surge, Jonathan Rolande from the National Association of Property Buyers, said: “This is bad news for just about everybody. Homeowners on a variable rate or looking to re-mortgage will be faced with paying hundreds of pounds more each month, buyers will be able to afford less and will have to reduce their expectations. There will now be further pressure on prices which will fall more sharply because of it.
“For those hoping this may be a storm that passes quickly, there was another piece of news released today that shows that’s unlikely to happen. Wages have grown at record rates thanks to employee shortages and many asking for rises to help cover additional living costs caused by inflation. The irony is that this will in turn further fuel inflation, making further interest rate rises more and more likely. The beginning of the so-called ‘doom-loop’ where inflation triggers pay increases that trigger inflation, that trigger pay increases.”
“It is normal in such times to see unemployment on a large scale which, as callous as it sounds, does effectively relieve pressure on wages and inflation. We are not yet seeing this and so we are in choppy waters for a considerable time to come.”
Outlining what Ministers could do to help the situation he added: “Could they loosen the rules around Buy to Let so that borrowers could rent their home as an alternative to selling, boosting the supply of rentals on the market. Currently Buy to Let mortgages are more expensive than homeowner loans. In certain cases, for example where the borrower wishes to travel or move in with a partner or family, the easy ability to let would avoid having to sell and possibly realise a loss on the home. There are also substantial fees when applying for a mortgage. These usually get added to the loan and are therefore not always scrutinised by borrowers. What is the justification for them and what is the process around deciding what is fair?”
