6th March 2009
(Aldershot, UK) The latest interest rate cut will erode the savings of first time buyers struggling to get onto the property ladder, warns property price website OurProperty.co.uk.
Ordinarily low interest rates are good for homeowners as they help to reduce mortgage payments, but in the current situation experts at OurProperty.co.uk say low interest rates will hurt, not help, the UK’s ailing property market.
The Bank of England cut interest rates yesterday by half a percent, from 1% to 0.5% – the sixth cut since October and an all-time low.
The decision to lower interest rates even further is aimed at reducing the cost of borrowing to get people spending again, avoid deflation, and meet the Bank of England’s 2% inflation target.
However, reducing interest rates will hit savers – including first time buyers who’ve been saving for a deposit on a house.
With inflation running at 3% year on year according to the Office of National Statics’ latest figures, savers, including first time buyers, are now losing up to 2.5% on any savings they have each year.
Chris Applegate, 27, works in online marketing in London and started saving to buy a house after finishing his Master’s degree 3 years ago. He says: “The rate cut is going to hurt as I decided to be sensible and wait until I could afford a house at a reasonable price. I’ve been happy to bide my time and rent until then, but long term, I face a further obstacles to buying as my savings will erode away.”
Although Chris believes the UK economy needs help before first time buyers, he’s aware of the implications of the Bank of England’s actions on his savings: “Interest rate slashes are very blunt instruments.”
Brendan McLoughlin, founder of OurProperty.co.uk commented: “For the housing market to recover we need first time buyers to come back to the market. That can’t happen now as banks aren’t lending unless you’ve got a big deposit, and first time buyers can’t get a big deposit when interest rates are paltry – and in real terms, inflation is eroding their savings.”
“It’s madness – there’s no incentive for anyone to save money. Can savings accounts even be called that now? Low interest rates mean we’ll see less first time buyers coming to the market, and since they’re fundamental to the housing ecosystem, it’ll take longer to reverse the house price crash. Reducing interest rates now is the worst thing possible for the UK housing market.”
Notes to editors
Where possible, please link to OurProperty.co.uk in online articles.
OurProperty.co.uk was the first website to offer sold UK house prices from the Land Registry for free. The site launched in 2005 and now has a total of 2 million members, averaging 30,000 unique visitors a day. Anyone can access regional statistics on house prices in England, Wales and Scotland online for free.
OurProperty.co.uk lists the price of sold properties between 1995 to 2008.
p: 0844 816 0025