Rising house prices and interest rates are leading to higher number of rejections

The UK has seen a massive rise in house prices, and a number of rises in interest rates over the past year.

The Bank of England has increased interest rates three times since last August, with a rise of 0.25% in August, taking the interest rate of 4.5% to 4.75%, and another 0.25% rise in November 2006, taking the rate to 5%. A further rise of 0.25% in January 2007 took the rate to 5.25%, and many think that there could be yet another interest rate rise of 0.25% in May, which would then take the base rate to 5.5%.

Property prices in the UK have also been soaring, and according to Rightmove the monthly rise in property prices for this month is 3.6%, which is the highest since April 2002. This reflects an average annual rise of 15%, and over the past year, according to figures, the average rise on property prices has been over £30,000. Rightmove state that there was an £8000 rise in property prices in March alone, reflecting just how quickly prices have been shooting up.

And a recent survey carried out by YouGov has suggested that the rising rates and prices are leading to more and more rejections from lenders on mortgage loan applications. Over the past six months around 460,000 applications for mortgages have been rejected according to the results of the YouGov survey, which equates to over 75,000 per month since October 2006.

The Chief Executive of MoneyExpert stated: "Affordability is the major issue in the mortgage market as recent reports of a drop in the number of first-time buyers demonstrates."

According to the figures those most likely to have their mortgage loan applications rejected by lenders are those aged between 18 and 34 years. More and more people are also staying at home longer rather than getting into high levels of debt and dealing with high interest loans to buy a property.

Tom Smith
27.04.07

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