Brokers are split over the effect of base rate increase and the Bank of England Governor's comments on house prices and buyer activity.
Chadney Bulgin partner David Thomas believes Mervyn King's comments have had as much effect on the housing market as the recent 0.25 per cent base rate rise.
He says levels of transactions have dropped since interest rate rises in May and June and clients are citing King's speech as the reason that they are acting with caution.
But Mortgageforce managing director Rob Clifford says he has seen no drop-off in demand but there has been a short-term preference for fixed rates. He says in the week after the last base rate increase, borrowers were keen to have a fixed rate but buying habits are already changing in favour of capped rates and some cashback and discounted products.
Clifford says a slowdown from the extraordinary growth that the housing market has seen over the past 18 to 24 months is inevitable and is not unhealthy.
He says: “The base rate increase has not quelled demand for mortgages but has changed buying habits in the short term. For people who want certainty, a fixed rate is worth its weight in gold.”
Thomas says: “Estate agents have told us that the number of new applicants has dropped dramatically and feedback indicates this is because of base rate increases and King's comments. I think there will be a reduction in house price increases but we will not see a drop as the base rate is still historically low.”
King's speech, p34