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Don’t rush property purchases, buyers warned

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11/09/2015
The prospect of rising interest rates should not force homeowners to rush through house purchases.

While the Bank of England’s Monetary Policy Committee this week voted to keep interest rates at 0.5%, many people are expecting rates to rise early in 2016.

However, house hunters should not rush through purchases in order to grab a good rate, according to Simon Checkley, managing director of mortgage broker Private Finance.

“At the beginning of 2015, the market was pricing in that interest rates would increase (to 0.75%) in the second half of this year at the earliest; now the second quarter of 2016 is looking more likely, given the Bank’s latest inflation report, Mark Carney’s recent comments and the most recent MPC minutes,” he said.

Checkley told borrowers that when rates do increase it is likely to cause a slow change in high street interest rates, rather than sharp rises.

“For those homeowners who are still concerned about future interest rate increases, it is important to remember that the market is predicting that the Bank Rate will remain below 2% in 2017 and 2018 and will probably reach a new long term average of 2.5% sometime after 2020,” he said.

“That is still half of what it was before the 2007-2008 credit crisis when the historical average was 5%. This means that if you are planning a property purchase you may do so with confidence; even if interest rates do start and continue to rise, where rates will settle would appear to be very much lower, even half long term historic levels.

“For the very cautious, a secure option would be to look into 5 or 10 year fixed rates that are currently being offered at around 2.5%-3.5%; a clear reflection of how the mortgage market feels about long term rates.”

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