Interest Rate increase has deterred 56% of 25-34-year-olds from climbing the ladder

The latest research by leading hybrid estate agent, eMoov.co.uk, has looked at what impact the recent increase in interest rates has had on UK homeowners. eMoov surveyed over 1,000 UK homeowners and found that while it was the first increase for just 37 per cent of respondents, this climbed much higher for those in the first-time buyer age bracket of 25-34.

As a homeowner, is this the first time you have experienced an increase in interest rates?
While it was the first increase for just 37 per cent of UK homeowners, this climbed to 78 per cent for those aged between 25-35.

London was home to the highest number of homeowners seeing a climb for the first time at 63 per cent, with the North East being the highest region outside of the capital (55 per cent).

What impact did this have on your monthly payments?
But despite this first for many, when asked what impact it had on their monthly mortgage payments, 64 per cent hardly noticed, while 33 per cent saw a manageable increase. Just 3 per cent believed it had a serious impact on their monthly affordability.

45-50-year-olds were worst hit with 5 per cent seeing a serious impact on their monthly payments, although this increased to 11 per cent for those in both the South West and North East. It was least notable in Wales, where 83 per cent of those surveyed answered that they had hardly noticed an increase.

Has the recent increase in interest rates put you off from buying another property?
Despite being the first increase in over a decade, 46 per cent of those asked remained undeterred from buying another property, with 17 per cent put off from a property sale and 13 per cent putting the idea of a purchase on hold for the time being.

However, those in the first-time buyer age bracket seemed more deterred from another purchase with 56 per cent put off from climbing the ladder, 40 per cent indefinitely, 16 per cent for the time being.

The increase was a put off in the capital more so than anywhere, where the high price of property can mean even a marginal hike can result in a large increase in unaffordability. 60 per cent of homeowners in London were put off from another purchase by the recent increase in rates, 50 per cent completely with a further 10 per cent deterred from the time being.

How much would interest rates need to increase by to stop you buying another property?
eMoov then asked how much rates would have to increase by to stop them from climbing the ladder. With affordability still at an almost record low, nearly half (49 per cent) of homeowners would have to see an increase of 2 per cent or more before they were deterred. 15 per cent would have to see rates climb by up to 1.5 per cent, 18 per cent by up to 1 per cent and 12 per cent by just 0.5 per cent.

The 55+ age bracket is best placed as a result of years of continued property price growth, with 71 per cent needing to see a 2 per cent or more increase before being put off.

Mortgage Length and Fixed Rate Availability
55 per cent of UK homeowners believe the available length of mortgage agreements should be increased, while 45 per cent also think the variable rate mortgage should be scrapped.

Founder and CEO of eMoov.co.uk, Russell Quirk, commented:

“Encouraging signs that while many on the first rung or two of the ladder have only just experienced their first increase in interest rates as homeowners, the majority have weathered the financial implications and the marginal hike has made it easy enough to do so.”

“Market confidence remains high but understandably there is some trepidation among the younger generation of homeowners, who will have heard horror stories of consistent hikes and double-digit rates, and as a result, may be treading with caution after seeing their first increase.”

Q1. As a homeowner, is this the first time you have experienced an increase in interest rates? by Demographics

All

%

Yes

37%

No

63%

25 – 34

Yes

78%

No

22%

London

Yes

63%

No

37%

 

Q2. What impact did this have on your monthly payments? by Demographics

All

%

Hardly noticed

64%

A manageable increase

33%

A serious impact

3%

45 – 54

Hardly noticed

69%

A manageable increase

26%

A serious impact

5%

North East

Hardly noticed

78%

A manageable increase

11%

A serious impact

11%

South West

Hardly noticed

46%

A manageable increase

43%

A serious impact

11%

 

Q3. Has the recent increase in interest rates put you off from buying another property? by Demographics

All

%

Yes

17%

No

46%

Only for the time being

13%

I am not interested in buying another property under any circumstances

24%

25 – 34

Yes

40%

No

34%

Only for the time being

16%

I am not interested in buying another property under any circumstances

10%

London

Yes

50%

No

35%

Only for the time being

10%

I am not interested in buying another property under any circumstances

5%

 

Q4. How much would interest rates need to increase by to stop you buying another property? by Demographics

All

%

Another quarter of a percent

5%

Up to 0.5%

12%

Up to 1%

18%

Up to 1.5%

15%

Up to 2% or more

49%

55+

Another quarter of a percent

5%

Up to 0.5%

8%

Up to 1%

9%

Up to 1.5%

8%

Up to 2% or more

71%

 

Q5. Should the available length of a mortgage agreement be lengthened? by Demographics

All

%

Yes

55%

No

45%

 

Q6. Should variable rate mortgages be scrapped? by Demographics

All

%

Yes

45%

No

55%