Interest rate rises could lower house prices in Scotland

04-Aug-2006

The 0.25 per cent rise in the base rate, after 11 months of an unchanged rate of 4.5 per cent, could mean more affordable homes for first time buyers, claim banks and mortgage lenders in Scotland.

Donald Macrae, the chief economist of Lloyds TSB Scotland, told the Scotsman that the rise in the base rate could prove to be beneficial to first time buyers.

"From the point of view of the first time buyer, this could be a sensible move. It might make the purchase more expensive in the short term, but if it pulls back the housing market, it could be beneficial for first-time buyers."

Meanwhile, the Council of Mortgage Lenders (CML) said that the interest rate rise could slow down the mortgage market.

"Sentiment in the mortgage market is closely linked to interest rates, so in the coming months there is likely to be some moderation in the recent record levels of mortgage lending. We have been forecasting this for some time," said Bob Panell, head of research and information at the CML.

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