Rate rises 'could affect property sales'

Posted: 11 May 2007 09:33:55 GMT

Interest rates have seen a further hike to 5.5 per cent after the Bank of England announced a quarter-point rise yesterday.

Interest rates have seen a further hike to 5.5 per cent after the Bank of England announced a quarter-point rise yesterday.

Now experts are predicting the latest increase - the fourth in nine months - will have a negative effect on property sales and put up the cost of borrowing money.

It had widely been expected that higher rates would be levied by the Bank in an attempt to combat bulging levels of inflation and spending.

The Consumer Price Index's level of inflation hit 3.1 per cent during March and was significantly higher than the government's target of two per cent.

As a result of the base rate rise, high street banks including the Bank of Scotland have said that they will follow suit and increase non-fixed lending deals.

Martin Ellis, chief economist at Halifax, suggested that the boom in housing may be about to end.

"House prices increased by 1.1 per cent in April; the smallest monthly increase so far this year and the second-lowest since July 2006. There is accumulating evidence of a slight easing of conditions in the housing market with further signs of moderation," he stated.

According to the BBC, homeowners may have to pay an extra £16 on mortgage repayments in the wake of the rise.

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