Don't Panic Over Rate Rises
There's been a tremendous amount in the papers recently about interest rate rises and the effect they'll have on the housing market. But, as Andrew Bush, director of Bush Property Services explains, there's no need to panic.
"Everywhere you turn at the moment, it seems you can't avoid discussions about interest rates and house prices," says Mr Bush, "With some of the more excitable media outlets forecasting gloom and despondency all round.
"The truth is a little different. Interest rates are currently at 5.5%. If, as seems likely, they hit 5.75% by the autumn, they'll still be at roughly a third of the value they were in the dark days of the late '80s and early '90s when, for a short time, they hit 15%.
"Not only that, but the long term prospects for interest rates appear stable. Last week's CBI quarterly economic forecast predicted that rates would not hit 6% and would remain at around 5.5% - 5.75% for the next eighteen months or so.
"Equally, the latest inflation figures show a slight drop to 2.5%, again reducing the upward pressure on rates.
"All the above are hardly indicative of rampant interest rates putting a squeeze on the housing market and indeed the Nationwide's house price report for May showed that prices still rose by almost 10.5% in the last twelve months.
"As a result, if you're wanting to buy a property, it should be very much business as usual. We're nowhere near either the top or bottom of the market, so there are no huge killings or great losses to be made. Provided you're sensible about what you want, where you want it and how much you can afford, you won't go wrong.
"Don't forget that property is a long term investment and it's still better to buy than to rent. And of course if you're buying and selling at the same time, you'll experience the same market conditions for both properties.
"If you are concerned about interest rates and mortgages, however, there are certain things you can do to protect yourself.
"Firstly, do make sure you shop around and don't take the first rate that's offered to you. Be particularly wary of acquiring a standard variable rate mortgage (SVR). This will almost certainly be a bad deal as it tends to come in at around 2% over the base rate.
"If you do currently have the misfortune to be lumbered with an SVR, you should be able to get a better rate elsewhere.
"Fixed rates are good for peace of mind. They're very simple - a fixed mortgage ties you into a prearranged rate for a set period of time, normally two or three years, and they give borrowers the great advantage of being able to budget effectively. Make sure that you don't get a rate that's too high as if rates do come down, you'll be paying far more than you need.
"Do be aware however, that as soon as a fixed rate deal ends, you'll automatically be put on the SVR, so make sure you react quickly and find a better deal.
"Other options include capped deals, tracker mortgages and discount mortgages. You should be able to find one that's right for you.
"So - don't panic, use your common sense, don't overstretch yourself financially and you won't go far wrong".
"Ultimately, the market is reasonably stable at the moment and functioning well. Properties are still coming onto our books every week and they're still selling".
For more information call Sarah-Jane Jarrold at SJPR 07730 494 154
