Chat to a team member

Blog

Interest rate rise proves demand catalyst, not killer.

Jonathan Samuels Jonathan Samuels
Posted on Dec 11, 2017 | in Blog

Slightly curious house price data emerged from the Halifax at the tail end of last week. While the annual picture is of a market that continues to slow down, with growth of just under 4%, in the three months to the end of November prices actually rose by 2.4%, the fastest three-month rise since January of this year.

In November alone they rose by 0.5%, which is a pretty healthy innings in the current climate. So while the market is in slowdown mode overall, it seems to have woken up a bit in recent months. This seems a bit odd given that rates have just gone up for the first time since 2007.

Dig deeper, though, and it seems the improved performance of the market in the past quarter suggests the first interest rate rise in a decade served to ignite, rather than temper, demand. Based on this evidence, the build-up to the November rate rise, and then the rise itself, brought prospective buyers out into the open rather than sent them underground. It was a demand catalyst rather than a demand killer.

The likelihood, during September, October and, post-rise, November, is that many buyers came to the conclusion that it is better to move now while mortgage rates are still low than further down the line when they could be less competitive. This put upward pressure on prices.

To put it another way, we may have had the first interest rate rise for a decade but rates are still not far off all-time lows. So if you are going to lock into a decent rate, many people seem to have concluded, it’s probably best not to delay, as the best rates are arguably on borrowed time.

You suspect that Brexit-related uncertainty is also a factor for many households. As things stand, it's hard to know how things will pan out for the UK economy — and against that backdrop moving now for many households will be seen as the better option.

There's also a sense among UK buyers that prices are unlikely to fall much even if the economy does hit a few road bumps. The reason for this, you guessed, is the sheer lack of homes both for sale and being built

Or in the words of Russell Galley, Managing Director, Halifax Community Bank: "The imbalance between supply and demand continues to support house prices, which doesn’t look like changing in the near future." Now that's something I think we can all agree is correct.

More in this section

Mark Posniak

Four years old, flat out and having fun

Feb 24, 2021 | Blog

I can’t believe that this week we celebrated our fourth birthday,…

Mark Posniak
Mark
READ MORE

Specialist lending flies over the cuckoo’s nest

Feb 11, 2021 | Blog

If the closing stages of 2020 were crazy, the start to 2021 has…

Mark Posniak
Mark
READ MORE

Redemptions milestone amid pandemic my proudest moment yet

Jan 15, 2021 | Blog

Over the years the team here at Octane has achieved many great…

Matt Smith
Matt
READ MORE
Sections
Archive
Twitter
Follow us @octanecapital

3 days, 13 hours ago
Octane Capital Ltd #BuyToLet #Lending at its finest. NO STRESS TESTING = Higher Leverage! Well done Josh Knight &… https://t.co/1xHg2sdE4h

3 days, 17 hours ago
I am so proud of our amazing Octane Capital Ltd team for their performance and efforts in Q2. It was a real slog a… https://t.co/FjdGmbzMh2

5 days, 11 hours ago
Next step in the Journey today with the official opening of our new long term home! Feel so proud of this moment -… https://t.co/tXAnJTxDMt

1 week, 2 days ago
Just about coming up for air now after a manic few weeks with the Euros, Wimbledon & finalising our office move to… https://t.co/6Q056agpTt

1 week, 2 days ago
really enjoyed recording this Andrew Robinson @OctaneCapital #3rdGen https://t.co/aIVXfyOZni

1 week, 4 days ago
Enough is enough! I am disgusted at the level of racist abuse Sancho, Saka and Rashford have had to endure. Ple… https://t.co/5rj7Zq6DIg