Interest Rate Rise

Last week the Bank of England finally decided to raise the interest rate to 0.75%, an increase of 0.25%. This is the highest level since March 2009 but, in historical terms, still incredibly low.

For most observers, this was no surprise and would have happened earlier in the year if the wider UK economic picture had been slightly more robust.

The ultra low interest environment has done much to underpin a recovery in the housing market over the past few years so any upward shift will naturally concern house builders. However, I think the question is whilst an increase in mortgage rates will theoretically dampen demand for new homes will there be a material practical difference?

On a variable rate mortgage of £150,000, the quarter of one per cent rate rise will increase mortgage payments by less than £20 a month. I would suggest that is unlikely to dissuade a new home buyer from going ahead with their purchase.