Property Know

After huge speculation over the forth coming interest rates, people’s predictions have been confirmed. We at Rent Home Manchester, probably like most of you out there, believed this was going to be the inevitable outcome. On the 9th of November 2006, interest rates rose from 4.75% to 5%, its highest level since September 2001.

Mervyn King (head of Monetary Policy Committee); decided upon this rise due to number of reasons, firstly there has been a sharp increase in prices in all aspect of the economy. In particularly the housing market has seen considerable prices rises, as house price growth has exceeded expectations due to a shortage of supply. Following this we have seen positive economic growth, an increase in consumer confidence and in particular a substantial rise in energy prices.

The rise in interest rates is necessary in order to curb inflationary pressures, especially house prices which are continuing to rise about 8% every year, and at the same time needed to promote economic prosperity. However this news won’t come lightly to home owners, as this will no doubt increase their mortgage payments. For example a person with an £150.000 mortgage will expect roughly a £20 increase a month on their existing mortgage. Consequently this will place added debt problems with many more increasingly finding it difficult to make repayments readily, on an already over stretched debt nation.

Although we at Rent a Home Manchester, believe the rise in interest rates won’t have a significant effect on peoples spending habits, nor will it cool down the property market. As we have seen in the past years it hasn’t been borrowing costs affecting the housing market, instead it has been the supply and demand of houses. We are still witnessing a shortage of supply and considerable high demand; therefore prices can only continue to rise rapidly. We expect property prices to rise in the near future, due to the consequence of population growth, especially the expansion of the European Union, and a trend of number of people living alone, but remember this is only Rent a Home Manchester own opinion.