First time buyers set to face further financial pressure

15-Jun-2007

New retail sales figures indicating that there has been no discernable slowdown in consumer spending are likely to lead to further affordability problems for first time buyers, it has been advised.

The figures from the Office of National Statistics have shown that sales volume rose by 0.4 per cent between April and May, with year-on-year figures now showing a 4.4 per cent rise.

Analysts told the Financial Times that even the bad weather last month had not affected consumers' spending rates, and suggested that further interest rate rises were now likely.

"Overall, these figures do nothing to reduce the chances that interest rates may have to rise significantly further in order to cool consumer activity and keep a lid on retailers' pricing power," Vicky Redwood of Capital Economics told the paper.

Earnings growth slowed to four per cent in March, significantly below the forecasted figure of 4.5 per cent, but even this figure is unlikely to prevent further rate rises from materialising in coming months, analysts predict.

To find out about the different ways of financing a first home, see our section ‘Affording Your First Home’.

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