As speculation mounts that the Bank of England’s Monetary Policy Committee (MPC) will increase interest rates further in November to 5 per cent, Mortgages Direct’s monthly survey reveals that the first-time buyer level has fallen to an annual low of 32 per cent in October from 25 per cent in September.
In addition to first-time buyers struggling to afford a property, the survey also shows the number of borrowers choosing interest only mortgages has increased by a third from 25 per cent in September to 34 per cent in October.
Peter Gladdy, director of Mortgages Direct, commented: “Borrowers are showing signs of heightened sensitivity to any changes in the interest rates. Although the market is still performing well, it seems that the August rise in interest rates was particularly bad news for first-time buyers, who are still finding it increasingly more difficult to get on the property ladder. Any further rise could be a catalyst to a serious downturn in the market. First-time buyers form the foundation of a healthy mortgage industry and if they are unable to buy because of high property prices and the fear of rising interest rates, the market will quickly draw to a halt.”
Gladdy continued: “The trend for borrowers opting for interest only mortgages is worrying and not advisable unless a comprehensive repayment method is in place. Our survey also reveals that homeowners are continuing to opt to secure a fixed rate mortgage for a longer period of five years or more. Consumers seem to have a bleak outlook on the long term stability of the housing market economy.”
