This was due to buyer confidence being knocked by the continued upward trend in increased interest rates.
Despite early indications of a buoyant start for the 2007 new homes market, the average price of a new home dipped slightly by 0.3% in January, as many new home buyers put plans on hold as they waited to see if another interest rate rise was in store.
The SmartNewHomes index recorded the biggest fall in the price buyers were willing to pay for a new home in over 10 months, indicating that buyers have become increasingly cautious of moving up the housing ladder and taking on larger mortgages, for fear of not being able to make monthly payments if rates continue to rise.
David Bexon, Managing Director of SmartNewHomes.com said: “We are currently witnessing the effect of the November interest rate rise, but the further impact of January’s increase is still to be felt. The decision to increase rates in January came as a shock to many, sending waves through the market as many potential buyers reconsidered the implications of taking on the additional debt that would arise as a result of stepping up the housing ladder.
“However, this month’s decision to maintain rates at 5.25% will have offered many buyers a degree of comfort and despite the marginal fall in the price of a new home recorded in January, overall prices are still up on those experienced at the same time last year, and over the last quarter.
“First time buyers in particular should talk to housebuilders rather than give up hope of affording their first home. Most developers are in a position to help purchasers by assisting with deposits, paying stamp duty and even subsidising mortgage repayments, so the new homes market will come into its own as prices and costs continue to rise.”
