High rates slowing housing market

Previous interest rate rises are starting to bring about a cooling effect in the housing market, economic experts have identified.

Interest rates have been raised three times in the months since August 2006 to a current level of 5.25 per cent, with the Bank of England attempting to stem inflationary pressures, among other reasons.

According to Fionnuala Earley, Nationwide''s chief economist, mortgage approvals and buyer enquiries have reduced since the start of the year, a process set to continue as the market reacts to previous interest rate rises.

Figures released by the British Bankers'' Association (BBA) yesterday also point to a slowing down of the market, with people less willing to part with their money to commence building on a new site or to invest in bricks and mortar.

Approvals to purchase a home on a piece of land have allegedly fallen by five per cent to 54,659 compared to the same period in 2006.

However, Howard Archer, economist at the Global Insight consultancy, said buyers would only "moderately" be squeezed out of the market.


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