John Wriglesworth comments:
“The current Bank of England base rate of 3.5% is the lowest since January 1955.
“Those predicting that the increase in the base rate will cause chaos in the housing market overlook that even at 4.0%, the base rate will still be the lowest since January 1955 – leaving out the two most recent changes.
“It is easy to forget that in the 70s and 80s, base rates rose as high as 17% and they didn’t fall below 5% from these highs until September 2001.
“Typical mortgage repayments as a percentage of household income averaged 21% in the 80s, then 22% in the 90s (source Halifax). At the current low base rates, this ratio stood at approximately 13%; the effect of even a 0.5% rise will increase the ratio to only 14.5% - still exceedingly low by historic standards.
“With lenders being more flexible with respect to multiples of income and with an increasing number of innovative mortgage products targeted to make house purchase more affordable, especially for first time buyers, we continue to be optimistic that the housing market will remain in a healthy state.
“House prices will continue to rise for at least the next 18 months. Our forecast for house price rises for 2004 is 4%, assuming no more major interest rises and provided the Chancellor does not do something silly in the Autumn Statement, like raising stamp duty.”
