Homeowners 'fearful' of rates rise


%VIRTUAL-SkimlinksPromo%More than one in three homeowners fear that a rise in interest rates will push them into financial difficulties, a report has warned.

Some people said they would struggle to find money for food, while others said they may have to sell up and rent as and when there was any hike in interest rates, according to the study by consumer group the HomeOwners Alliance and conveyancing provider Myhomemove.
The research found that 34% of people were worried that a rise in interest rates would mean they faced a tougher struggle to afford payments on their mortgage or other bank loans and debts, equating to 5.8 million homeowners if the findings were projected across the UK.

Younger homeowners were found to be more fearful of interest rate rises, with nearly half (49%) of 25 to 34-year-olds saying an increase would put them in difficulty, compared with under one quarter (24%) of people aged over 55.

The report quoted one person who took part in the study saying: "At the minute we can just about pay off (the) mortgage and bills with very little spare for food; with increased rates we would struggle to find money for food every month."

Another participant told the study: "I have other debts on top of my mortgage.

"I will probably be forced to sell and rent."

The report found that while some older homeowners would welcome the impact that interest rate
rise could have in getting them a better return on their savings pots, they were also concerned about
the effect on younger people with debt.

One older homeowner told the report: "For me it will not have an impact as I will complete my mortgage soon.

"However I am very fearful for my adult children and society at large."

On a regional basis, the survey of more than 2,500 people, of which around 1,600 own their property, found that homeowners in the East were the most concerned about a rise in interest rates, with 47% of people there saying an increase would make life more difficult.

The findings come amid mounting speculation that further steps could be taken to calm the housing market.

The Office for National Statistics (ONS) reported this week that house prices had jumped by 8% over the last year across the UK to reach around £252,000, and in London they had surged by 17% to £459,000 on average.

Bank of England governor Mark Carney recently indicated he was ready to take action to cool the market amid concerns over the threat a new property price bubble could pose to the wider economic recovery.

Mr Carney signalled the Bank could adopt a range of measures, including imposing a new "affordability test" for borrowers and advising the Government to rein in its Help to Buy scheme, which helps people with 5% deposits to move on or up the property ladder.

The Council of Mortgage Lenders (CML) said that it expects any possible steps to limit the housing market will be "careful" and "proportionate" rather than causing any dramatic change.

Paula Higgins, chief executive of the HomeOwners Alliance, said: "Homeowners are already really struggling to make ends meet, and millions could be pushed into real financial hardship when interest rates start to rise.

"It shows just how severe the cost of living crisis is that a rise in interest rates could lead to some homeowners struggling to afford food or being forced to sell their homes.

"The Bank of England needs to tread very carefully to avoid causing widespread financial difficulties."

Housing Minister Kris Hopkins said: "Interest rates are at a record low and home ownership is at its most affordable since 2007 thanks to the efforts this Government has made to fix the broken housing market and tackle the deficit we inherited.

"Latest figures show repossessions falling and at their lowest in over a decade, but we are far from complacent and would urge anyone to seek advice from their lender early if they have any money worries."

The people who affect house prices
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Homeowners 'fearful' of rates rise

They have the power to push a price higher, depending on how many other people are in the running for a home and how liberal they want to be with the truth to the buyers. In some cases, they can also do more harm than good by initially overvaluing a property. The worst case scenario is the home eventually sells for less than it would have done had it been priced realistically in the first place.

Sometimes a quick-moving solicitor can be the difference between getting the home at the price you want and getting into a bidding war or missing out entirely. If the buyer needs a quick sale, they're more likely to do a deal with someone who has a flexible solicitor who can push through the sale so it suits them.

Research by Halifax concluded that anti-social neighbours could take £31,000 off the price of an average home. If you’re selling, you should declare any problems you’ve had on a Seller’s Property Information Form, otherwise you could face a claim later on.

While an increase in Council Tax might not be too much of a deterrent to a potential buyer, plans to grant permission for new homes, a mobile phone mast or wind turbines could knock an asking price down. If you're a buyer, the local council should have details of any future planning applications and you can search them for a small fee.

A lot of traffic in an area obviously has an effect on air quality. Since 1997 each local authority in the UK has carried out studies of the air quality in its area. If an area falls below a national benchmark for air quality, it has to be declared an Air Quality Management Area (AQMA). Some residents of the Llandaff area of Cardiff expressed concern that it had become an AQMA due to an increase in traffic in the area. Whether this becomes a widespread issue remains to be seen.

Mortgage availability is a key driver of property prices. If no-one can take out a mortgage, then prices will stall and eventually fall. We've seen this happen in parts of the UK in recent years, as lenders tightened up their criteria following the credit crunch. Conversely, good mortgage availability will mean more people are competing for properties - to a seller's advantage if their home is desirable.

An outstanding local school can add around 8% to the value of a home, according to the Royal Institution of Chartered Surveyors. On the flipside, a not so good Ofsted report can take off a similar amount. If you’re concerned about a school’s performance, one way to get involved is to become a governor.

Initiatives such as the Help To Buy scheme have been credited with pushing house prices up. A buoyant economy with strong employment gives people the confidence to buy and leads to an upward shift in house prices, while rises in unemployment have the reverse effect. Planning restrictions, at both a national and local government level, affect the number of homes in a particular area.


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