Interest Rate Rises Would Dent UK Property Market Recovery

While the Bank of England's decision to keep interest rates at a record low 0.5 per cent has not come as a surprise to many, it could lead to an unbalancing of the country's real estate market in the long-term...

While the Bank of England's decision to keep interest rates at a record low 0.5 per cent has not come as a surprise to many, it could lead to an unbalancing of the country's real estate market in the long-term.

Analysts and industry commentators have warned that individuals with larger mortgages and first-time buyers could be in for an unwelcome shock if, as expected, the economy improves and the Bank is forced to make a series of sudden interest rate increases.

"If the economy turns a corner the MPC could be forced to make a series of sudden rate rises which could unbalance the housing market," said Jennet Siebrits, head of residential research at consultants CB Richard Ellis.

However, not everyone shares this view. Nick Hopkinson, director of property company, PPR Estates, is confident that rates will not be increased this year, noting that "any increase in borrowing costs would almost certainly tip the scales back into recession".

He does, however, believe that if interest rates do rise then things will get a lot worse for many struggling sellers in the UK.

- Monday 13 June 2011

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