Housing market 'would collapse' if interest rates were to rise

Posted: 03 Nov 2010 16:55:23 GMT

A specialist has suggested a rise in interest rates would have a severe impact on the housing market.

If interest rates rise the housing market could collapse, one expert has claimed.

Chief executive officer of Firstrung Paul Holmes said an increase of 1.5 percent on the base rate "could put people's mortgages up to seven per cent".

This, he noted, would cause an "awful lot of pain and grief in the property sector".

And Mr Holmes stated first-time buyers are still being priced out of the market, because dwellings are too expensive.

If an average individual earns around £25,000 a year they would need to take out a mortgage six times their annual salary in order to be able to purchase an abode, he explained.

The specialist also suggested house prices will only correct themselves if fewer people are in employment, as this will mean there will be decline in the number of Brits wanting to move up the property ladder.

According to Hometrack's monthly housing report, rising supply and falling demand is continuing to put house values under downward pressure.
 

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