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Housing market brushes off rate rise

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The increase in interest rates at the beginning of last month has not slowed the growth of the housing market, according to new research from a leading estate agent.

Despite the rise in the cost of borrowing, sales of houses as well as viewing figures rose in August and the cost of properties continued to be squeezed upwards by the lack of supply in the market.

However, senior analysts warned that if rates continued to rise, the knock-on effect would be felt by sellers.

On August 3rd, the Bank of England's monetary policy committee raised interest rates for the first time in two years, by a quarter of a per cent to 4.75 per cent.

Since then mortgage providers were slow to raise their rates and generally, when they did so, the increases were not large enough to cause a significant drop in demand for property.

Unconcerned by the added cost of borrowing, more than 143,000 buyers purchased properties last month, a rise of 11 per cent on the same month a year earlier. Furthermore, viewing figures also rose, by an average of one viewing per property from August 2005, reports Your Move estate agents.

David Newnes, Your Move's managing director, speculated that the bustling activity of house-buyers could have been down to the weather. "Perhaps the early demise of the warm weather this year has made them turn their sights to finding a new home," he said.

But Mr Newnes explained that it was the supply of houses on the market that was causing demand and prices to remain strong. "There is a serious shortage of homes for sale on the market which means that anyone considering selling should find a suitable buyer very easily," he added.

Last week Nationwide announced that house prices in August rose 0.8 per cent meaning that the average property price is some 6.6 per cent higher than in 2005 showing that the market is clearly strong enough to cope with the interest rate hike.

As reported on EstateAgencyNews.co.uk, National Association of Estate Agents (NAEA) chief executive Peter Bolton King said: "As interest rates are still at low levels compared with past averages, we believe that the property market can absorb a 0.25 per cent rise this time."

However, he added that "further rises could well create a slowdown in housing market activity".

Although borrowers do not appear to have been put off this time by the monetary policy committee's actions, more rate rises coupled with higher council tax and fuel costs could put a serious dent in buyers' pockets in the future.

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