Interest rate rise spells cranks up pressure on first time buyers

05-Jul-2007

First time buyers have been hit by the news that the Bank of England has raised interest rates to 5.75 per cent, with more borrowers likely to be priced out of the market as a result.

Though the move was widely anticipated, a fifth rise in eleven months means that homeowners have experienced a sharp upturn in the amount of interest they pay on their mortgages since late last year.

"We'll have to wait and see how providers react, but the average fixed-rate mortgage is already over the six per cent mark and deals under five per cent are on the way out," noted Sean Gardener of MoneyExpert.com.

"This latest increase in UK interest rates will further dampen housing demand going forward as first time buyers find their borrowing constrained," added David Stubbs, chief economist at the Royal Institution of Chartered Surveyors.

Finance website mform.co.uk, meanwhile, estimates that as many as eight million borrowers will struggle to keep up with the latest base rate increase.

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