Confidence in housing market falls

13 April 2012

CONFIDENCE in the housing market fell for the second month in a row during July as people began to feel the impact of recent interest rate rises, figures showed today.

Around 62% of homeowners said they expected the value of their property to increase during the coming 12 months, down from 65% in June and 67% in May, according to The Woolwich.

The fall in confidence comes after the Bank of England Monetary Policy Committee raised interest rates for two months in a row in May and June.

It has now increased the cost of borrowing by 1% to 4.5% since November, and rates are widely expected to end the year at 5%.

Andy Gray, head of mortgages at The Woolwich, said: 'This continued fall confirms our prediction that confidence would gradually decline as interest rate rises bite and people become more cautious about borrowing decisions.

'With a rate rise predicted this Thursday and a further rise before the end of the year, we would expect this downward trend to continue until the end of the year.'

But he added that people's confidence in the housing market was still higher than it had been this time last year, when only 55% of homeowners expected the value of their house to continue rising during the coming 12 months.

People in Scotland are least optimistic about house prices, with just 57% expecting the cost of property to continue rising, followed by those in the North East where 60% expect further rises.

Those in the South West were most confident, with 67% of people expecting their property to be worth more in a year's time than it is now, followed by 66% of people in Wales.

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