Base rate game’s winners and losers

The Bank of England must be breathing a sigh of relief. It seems that four interest rate rises in 10 months are at last getting through to the public.

Figures from the BoE show mortgage app-rovals were down to 107,000 in April, a 12-month low and the third month in a row that they have dropped.

A decline over one or two months could be dismissed as a blip, but three months and people sit up and take notice. There’s definitely a downward trend in house buying activity.

And with another rate rise predicted this summer, even more consumers will think twice before taking out mortgages or refinancing existing home loans. This should dampen the market and keep house price inflation in check.

But when you look at specific areas of the UK, the picture quickly becomes muddied. House prices in London and the South-East continue to surge ahead, causing a headache for the pundits. The dearth of supply in these areas is keeping prices buoyant and it could be a few months before these regions follow the downward trend.

The ill-fated Home Information Packs seem to have slowed things down a bit but this could soon correct itself. Many buyers tried to avoid HIPs before their original introduction date of June 1 by putting their homes on the market in May.

A sudden spike in supply cooled things down a little, but with HIPs delayed many speculative sellers could take down the ‘For Sale’ signs.

The next test is whether owners possessing houses with four bedrooms or more will put their properties on the market before HIP 2.0 comes into force this August. However, many ex-perts think the packs could be scrapped before then, so home owners would be wise to sit tight this summer.

But it’s nothing but bad news for the first-time buyers who are scrimping and saving to get on the property ladder. Many of them must feel that somebody up there doesn’t like them. The typical first-timer will now have to borrow more than 3.3 x salary, a worrying echo of the income ratios we saw in the 1990s. And with further rate rises predicted, things will get worse before they get better.

Buy-to-let landlords who have invested sensibly will be rubbing their hands with glee. Another rate rise will mean higher interest payments, but it will also deliver a fresh wave of tenants who can’t afford to buy, boosting demand and providing landlords with the opportunity to put rents up.