Another interesting read from Property Industry Eye:


So what will happen when interest rates rise, as Bank of England Governor Mark Carney has suggested, at around the turn of the year?

Well, putting aside that Carney has said this sort of thing before and it hasn’t happened, the effect could be imminent woe, death and destruction – or not.

The Guardian is fairly confident that the end of the world is nigh.

The housing market could collapse and “it is estate agents who have most to fear”, it says.

The paper reasons that it won’t be so much about mortgages and affordability, but about confidence.

It also predicts that lenders won’t wait until base rates rise early next year, but will start repricing their mortgages “almost immediately”.

As for borrowers, one third will struggle if interest rates rise, consumer spending will fall and there’ll be repossessions.

It all sounds like a terrifying vision of doomsday about which all of us should do something very quickly indeed – such as hand back our keys if we’re borrowers, or go into recession survival mode if we’re agents.

But here’s a mortgage broker with a more reassuring view.

Simon Tyler said rates may not rise for all borrowers, even if the base rate does increase.

“If we see a rate rise next year, those on tracker loans will be hit straight away but many other people may not be affected – at least initially.

“Competition in the mortgage sector is so intense, with so many new entrants vying for market share, that we may find that the first rate rise is hardly passed on at all by many lenders.

“Remember, most lenders’ standard variable rates are already at over 4%, which is miles above the level of the base rate at just 0.5%.

“So we may not see much movement at all, even after a rate rise.”

Long-term, Tyler is not quite so sanguine: “However, if a rate hike is passed on it is going to hurt. Household debt is so high, with so many people stretching to repay their mortgages and other credit, that any rate hike is going to be very painful and have a disproportionate impact.

“Remember, wages have barely been rising for years but many people have stretched to get on the housing ladder, often only with the aid of government assistance.

“These people may find a rate hike hard to cope with.

“House prices are unlikely to be hit very hard given that demand is still so high, but it could dampen the market a little and slow price growth in some areas.

“First-time buyers may find some areas where prices drop back a little which will help them, but at the same time they are likely to find that higher rates mean they won’t qualify for the mortgage that they want.

“As rates begin to rise you could even see a rush of people coming to buy because they fear they will miss the boat if rates increase too far, and that could even push house prices up in the short term.

“In short, raising rates will have to be a very delicate process in order not to derail the economic recovery which is actually paper thin. If they rise too fast too soon it will take away the feel good effect that people are starting to get with rising wages and push the economy backwards. Business borrowing could be hit and that would hit employment.

“The fact is that any big increase in rates is still some years away and competition among lenders should ensure that there are fantastic value deals still around for several years from now.”

And what did Carney actually say? That rate rises will be “limited and gradual” and “proceed slowly” rising to a “level in the medium terms that is perhaps half as high as historic averages”.

We suspect that most estate agents will be telling the public: “There has never been a better time to sell – or buy.”