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Rate rise may slow market

Thursday, 2 November 2006 12:00 AM

With just a week to go before the Bank of England announces whether interest rates will go up, estate agents are warning a further rise may slow the market.

The National Association of Estate Agents (NAEA) is advising the Bank of England against the expected rate rise on November 9th, where interest rates are expected to go up 0.25 percentage points to five per cent.

From the minutes of the October meeting of the Monetary Policy Committee (MPC), who set interest rates, there is a strong indication the Bank of England will vote for a rate rise next week, said the NAEA.

Peter Bolton King, NAEA chief executive said: "The residential housing market on the whole has performed well in 2006, and it is clear that activity has improved from the downturn seen in the market during 2005.

"However I would ask the Bank of England to remember that the market differs significantly throughout the UK, with some areas of the country seeing a slower housing market whilst London, the south-east and East Anglia are performing particularly well.

"A further rate rise could have a detrimental effect on the areas that are already looking slightly flat."

Mr Bolton King points out figures from the Council of Mortgage Lenders and the NAEA in September show a slight downturn in the market since the last rate increase in August, from 4.5 per cent to the current 4.75 per cent.

He said: "The market, it appears was buoyant enough to absorb the rise without too drastic an effect, and from all reports the market is still in good shape. However there has to be doubt as to whether a further rate rise will be absorbed with the same confidence, I urge the MPC to consider this carefully before they cast their vote."

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