RICS state first time buyers to suffer due to interest rates

A report that was issued very recently has confirmed what many people already suspected – that those due to take the hardest hit from the recent interest rate hikes will be first time buyers.

According to the research, which was carried out by the Royal Institute of Chartered Surveyors, first time buyers will suffer most as a result of the interest rate hikes, even more than buy to let investors. The interest rates have been hiked up three times in the last six months, and the rate has increased by three quarters of a percent since August last year.

According to research affordability on mortgages was at its worse since the early 1990s, and this could result in many first time buyers struggling to keep up with repayments, with a large number of them being young and on lower incomes than established home owners and buy to let mortgage holders. With three interest rate rises to deal with in a short period of time, many first time buyers that opted for a variable rate mortgage may really struggle with the sudden rise in repayments on their mortgage.

RICS economist David Stubbs stated: 'January's surprise interest rate rise is likely to soften new buyer enquiries in the coming months but those buyers who have already taken the housing market plunge could find mortgage companies knocking at their doors in the near future as affordability conditions bite.'

However, experts have also noted that many recent first time buyers opted for fixed rate mortgages, and therefore may not have felt the pinch quite as much.

Neil Johnson, PR and Policy Manager at the Building Societies Association said: 'For those yet to buy a home, the rising rates are a problem, but there are many among those who have already taken on mortgages and stretched their affordability who are not affected because they have fixed rate loans.'

Tom Smith
10.02.07

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