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Rising house prices and interest rates put off home buyers with UK property sales plummeting



Rising interest rates will prevent people getting onto, or moving up the property ladder, as the cost of living crisis forces a slowdown in sales, new research shows.

More than a quarter of UK renters say rising interest rates pose a threat to their chances of owning a home, while almost one in five existing homeowners fear their mortgages will become unaffordable, according to lender Market Financial Solutions (MFS).

The Bank of England increased the base rate from 0.1 per cent to 0.25 per cent in December 2021.

It was then hiked further to 0.5 per cent in January and the wider markets expect it to reach 1 per cent from 17 March, when the Monetary Policy Committee next votes.

MFS’s research shows 18 per cent of UK adults intend to buy a property in 2022 and among renters, 14 per cent plan to buy their first home.

Among homeowners, 14 per cent plan to sell up and move home in 2022, while 6 per cent hope to buy an additional investment property.

Of those planning to buy a property this year, two thirds said they are also worried about inflation and rising house prices.

The latest Halifax House Price Index showed the average house price hit £276,759 in January, a rise of 9.7 per cent compared to the year before.

This, MFS’s research shows, will likely hinder people’s chances to buy.

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Paresh Raja, chief executive officer of MFS, said: “As the cost of borrowing increases, homebuyers will need to consider the budgets carefully and assess their options.

“It is important that any buyers – from first-timers to seasoned investors – weigh up their options.”

The options available to buyers may themselves be limited.

Non-seasonally adjusted property sales were 85,520 in January according to HMRC, down 12.6 per cent form a year earlier.

Hargreaves Lansdown said the drop in sales reflected the impact of interest rate speculation and the stamp duty holiday dwindling away, but sales are unlikely to improve.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “We’re not expecting sales to pick up in the immediate future either.

“We’re battling the biggest squeeze on incomes in a generation, including a 54 per cent hike in energy prices that’s going to force everyone to reconsider their spending.”

As consumers struggle to keep on top of the cost of living crisis, it will likely force them to think about whether now is the time to stretch their finances further.

Ms Coles added: “It means there’s a good chance the spring isn’t going to lift the chill in the property market.”

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