THE interest rate rise will feel like “yet another nail in the coffin” of the property market, an expert has said.

Jonathan Rolande, from the National Association of Property Buyers, said: “The rate rise from 2.25% to 3% will be very unwelcome for millions of borrowers who are now faced with higher monthly charges at a time when household finances are under immense pressure. The need for higher rates to combat inflation is clear, but the NAPB hopes that the measures to combat price rises will be successful quickly before householders are driven into serious, long-term financial hardship.

“Today’s interest rate rise will feel like yet another nail in the coffin for the property market. Rates have already increased fast, and this latest hike will cause great concern amongst property owners and those hoping to buy.
“Homeowners will be very concerned about the likelihood of falling prices. About 80% of mortgaged owners have a fixed rate but the clock is ticking, and thousands are coming off fixed deals and onto variable rates. This means that many will soon see repayments rocket. Those on variable rates already will feel immediate pain when the increase is passed on for December.
“Tenants aren’t immune to this rise either, because landlords will be looking tto recoup increased costs by increasing rent.

On how he thinks those looking to buy a property will react, Mr Rolande continued “Homebuyers have already seen rates rise and will have factored this in. Prices aren’t dropping noticeably yet. I suspect we are witnessing a lag which is seeing prices holding. Buyers who can now afford to borrow less are reducing expectations.

“This will impact businesses too. Many will pay more for lending so will be faced with a choice of keeping prices of their goods and services the same and accept reduced profits, or increase them to cover the additional costs. The latter is more likely – this will further fuel inflation.

“Savers will probably be happier as multiple rises mean rates now make money in the bank more attractive. However, due to inflation, it is losing value year on year even at the higher rates.
“I also suspect many buy to let landlords are likely to sell up to bag a good price and put profits in the bank for a trouble-free income.
“The only chink of light and good news, is that international markets love an interest rate rise. So we should see longer-term borrowing become cheaper as the market begins to trust UK PLC once again after the failure of the recent mini-budget. This could be good news for those about to take a fixed-rate loan.”