Interest rate changes lead homebuyers to be more cautious

As the possibility of a fifth interest rate rise in under a year looms large, home buyers are becoming more prudent in the steps to reduce the risk of mortgaging their homes to their financial limits. Research from Yorkshire Bank’s Mortgages team suggests that since the Bank of England has been taking measures to lower house prices and curb inflation homebuyers are becoming more cautious. Almost a quarter of buyers have admitted that they are looking to avoid taking out a maximum mortgage. By cutting household expenditure back, homebuyers are hoping that they will find it easier affording their home. Many sacrificed holidays, social life and nice cars so that they could eventually own their homes. First time buyers are also cutting back on their lifestyle with over a third adapting their lifestyle to ensure that the dream of buying a first home becomes a reality. Yorkshire Bank’s research has found that first time buyers intend to demonstrate greater caution with almost a third intending to avoid stretching their finances from the beginning to avoid a further rate rise tipping them over the edge of affordability. There was a great anticipation for a further rate rise over the next year with three quarters of those surveyed expecting it. Gary Lumby, Yorkshire Bank’s Head of Retail, said: “What our survey shows is prudence, not panic - all the signs are that the market will still remain strong. But with rises in the Bank of England’s base rate, and with many economists predicting a further rise if not next month, then in the near future, it is inevitable that homebuyers will become more a little more cautious with their borrowing. “The recent rises have started to make buyers take a realistic view of what they can and can’t afford and to take measures to protect themselves against unforeseen changes in their personal circumstances. What we’re seeing is buyers being shrewder than when the housing market was at its most buoyant, both in the price they’re prepared to pay for a home and how they choose to finance it.” House prices were also expected to continue rising with seven out of ten people citing this. Despite this only one in six would be prepared to offer the full asking price for a property immediately.Homeowners with multiple credit card bills, looking to remortgage their property to pay these off as a result of the increase in the Bank of England’s base rate, could consider a secured loan as an alternative. A secured loan could allow homeowners to consolidate existing debt into one monthly affordable payment. Multiple store and credit card bills could be consolidated leaving homeowners with peace of mind to plan ahead safe in the knowledge that their finances are in hand. Debt consolidation loans are made payable over a term to suit the borrower from 5 to 25 years and from any amount £10,000 to £100,000. Homeowners should remember that repaying over a longer term will increase overall interest charges.