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Consumer anxieties over rising interest rates fall

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Written by: Hannah Uttley
21/01/2015
Concerns over interest rates as one of the main barriers to buying a property have fallen among consumers, as inflation dropped to 0.5 per cent in December 2014.

The Halifax Housing Market Confidence Tracker showed a 6 per cent drop in Q4 2014 in the number of potential buyers who viewed interest rate rises as the main barrier to buying a property. The proportion of consumers citing concern about interest rates as a barrier fell to 13 per cent in Q4 2014 – the lowest level in over a year – dropping from 19 per cent in Q3 2014.

Martin Ellis, housing economist at Halifax (pictured), said: “Speculation over a potential rate rise was high on the news agenda at certain times in 2014 and the Housing Market Confidence Tracker showed consumers becoming increasingly anxious about interest rate rises. But with inflation falling sharply in the last few months it’s taken away some of risk of an imminent rise and worries have fallen accordingly.

“While a rate rise will happen eventually, lenders take this into account as part of our affordability checks in the mortgage application process. Going forward the key factor in how they adjust to any changes in rates will be the way in which borrowers manage their disposable income.”

The largest barrier to buying a property identified among consumers was the perceived ability to raise a deposit, with six out of 10 (61 per cent) respondents saying this was a struggle. Ellis added that the number of schemes launched recently, such as Help to Buy, to support borrowers with smaller deposits had improved mortgage affordability “significantly in recent years”.

He said: “Figures from the 2014 Halifax first-time buyer annual review show that the number of first-time buyers is at its highest level since 2007 and last year the number of first-time buyers increased by 22 per cent. This was the third successive annual increase with a 50 per cent rise in the past two years.”

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