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Rising interest rates ‘single biggest risk’ to housing market in 2014

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Rising interest rates are the single biggest risk to the housing market next year, according to a survey of consumers.

Over a quarter (27%) of the 2,000 UK adults polled by The Building Societies Association (BSA) said rate hikes were their biggest concern for 2014.

Consumers are also far more worried about the affordability of monthly mortgage repayments today than they were three months ago, with 46% of people saying that this is now a barrier to property purchase.

This is up by 11% on September 2013, reflecting concern about the rising cost of living and an increase in energy bills, the BSA said.

First time buyers, however, are feeling more positive about the property market compared to three months ago.

Although raising a deposit is still the largest barrier to owning a home, the number of people who believe this is the case has fallen by a third, from 66% to 44%.

The BSA said publicity around the Government’s Help to Buy schemes will “inevitably” have helped, increasing confidence among first time buyers.

Paul Broadhead, head of mortgage policy at the BSA, said: “It is understandable that consumers are wary about a rise in interest rates in 2014, but unless the pace of economic recovery picks up considerably, it is unlikely we will see the Bank Base Rate rise over the coming 12 months, and when interest rates do rise, it is likely to be gradual.

“There remain plenty of options for a homebuyer to get greater certainty over their mortgage repayments with 69% of the mortgage products available on the market now at fixed rates. When consumers apply for a mortgage, most lenders will also check that it is affordable were interest rates to rise, which should provide some comfort for homebuyers, though it may mean they can borrow less than they anticipated.”

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