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News: Homebuyer confidence remains strong

Homebuyers are taking interest rate raises in their stride, new research indicates. Neither August’s hike nor talk of a rise in November is unlikely to put off plans to buy a home or move.

However, homebuyers are looking to protect themselves from further rate rises, said the report from Yorkshire Bank.

According to the report, just one in 10 (9%) house hunters and one in five (18%) first-time buyers would consider putting off plans to buy due to the interest rate rise.

However, higher rates have led to a sharp increase in the number of people reviewing their mortgage deals, with fixed deals growing in popularity - especially amongst first-time buyers.

One in four (25%) first-time buyers are now considering fixed deals to protect themselves from further rate hikes - an increase of 13% in the last three months.   Homeowners are also keen to ensure they are still getting the best deal with one in five reviewing their existing mortgage arrangements.

Gary Lumby, Yorkshire Bank’s head of retail, said, “With many predicting further Bank of England rate rises, it is pleasing to see that buyers aren’t just continuing to search for houses without considering the financial implications of the higher rate of borrowing.”

According to figures from the Council of Mortgage Lenders, 127,300 people took out fixed rate mortgages in July, an increase of 14,100 on the same month in 2005.

Confidence remains strong

Yorkshire Bank’s research found that although nearly three out of four (70%) people believe the Bank of England will announce further base rate increases, confidence in the market remains strong.  Almost three out of four (71%) still think house prices will continue rising.

Gary Lumby said: “Despite further interest rate increases seeming likely, buyers fully expect house prices to continue growing and the market to stay strong.”

“If house prices were to slow or even fall due to higher interest rates then you might anticipate more people to put plans to buy on-hold.  However, with prices still rising people are still keen to get on and move up the property ladder.  But in this climate they may feel they have little choice – the longer the leave it, the more expensive it will be to buy – especially if interest rates do go up again.”

Drop off in offering under

Despite a rise in interest rates, the number of buyers prepared to offer under the asking price has fallen, according to Yorkshire Bank’s research.  Only 19% would now try an offer under the asking price - compared to 26% three months ago.

Gary Lumby said: “Normally you would expect that with higher interest rates, buyers’ budgets would be tighter.  This in turn might result in more buyers thinking to offer under the asking price.” 

“However, sellers are realising that with house prices continuing to grow, they are in the driving seat and can hold out for the asking price at least.  As a result buyers, are having to refine their tactics accordingly.”

Mortgaging to the max versus meals out

More than one in four first-time buyers say they would not wish to simply take out the largest mortgage possible, preferring to have a disposable income to enjoy a social life.

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