Rate rise deters younger homeowners from climbing housing ladder

The recent interest rate rise has deterred more than one in two younger homeowners from climbing the property ladder, according to a recent survey.

The survey, by online estate agents Emoov, found that 56 per cent of homeowners aged between 25-34 said there were cautious about moving up the property ladder, following the recent Base Rate rise.

A total of 40 per cent of these homeowners said this rate rise had put off them off buying property “indefinitely” while 16 per cent described themselves as more cautious “for the time being”.

Among older homeowners this trend was less pronounced. In total  less than half (46 per cent) of the homeowners surveyed said this rate rise would deter them from buying another property.

However, the survey found  most homeowners were not adversely affected by this rate rise.

eMoov said 64 per cent of the 1,000 homeowners surveyed said they had “hardly noticed” the increase, while 33 per cent change said this represented a “manageable increase” to their monthly mortgage repayments

Just 5 per cent of homeowner said the increase in the Base Rate – from 0.25 to 0.5 per cent – had a “serious impact” on the affordability of their mortgage.

The vast majority of mortgage lenders have increased their main mortgage rate by 0.25 per cent from 1 December, following the decision by the Bank of England to raise Base Rates last month – the first increase for a decade.

The survey found that for more than a third of homeowners (37 per cent) this is the first time they have seen their mortgage rate increase.

Not surprisingly this figure was significantly higher among younger homeowners, with 78 per cent of those in the 25-34 age bracket saying this was the first time they had seen mortgage rates increase.

Given the higher house prices in London, it is homeowners in this area that said the rate rise was more likely to put them off buying another property. Here even a marginal rise in interest rate can lead to a more significant increase in monthly mortgage repayments – if there is a sizeable loan on the property.

eMoov, chief executive Russell Quirk says: “While many of the first run or two of the property ladder have only just experienced their first increase in interest rates as homeowners, the majority have weathered the financial implications and the marginal hike has made it easy enough to do so.

“Market confidence remains high but understandably there is some trepidation among the younger generation of homeowners, who will have heard horror stories of consistent hikes and double digit rate and as a result may be treading with caution after seeing their first increase.”

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