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Paramount Properties Our Take on the Rise in Interest Rates

Our Take on the Rise in Interest Rates

In my view this will, I think, give buyers even more power to negotiate in an already fragile market.
They will further have the option to "wait and see" as with prices falling or at best stagnant in some instances, the possibility of their purchase in the shorter term still going down in value will further dampen a buyers confidence to buy now whilst they consider the "investment" side of their purchase and any potential impact on that.

With an average flat owner moving every 4-6 years my observations are that it is an 80% investment and 20% purchase and so the exposure to market fluctuations as currently occurring is greater over a shorter period of years particularly when the climate is uncertain like at present.
Couple that with a house owner that might move every 10-15 years or more, the pointer is reversed to 80% for a home and 20% investment as the ability to stay longterm alleviates the worry of market conditions and often lifestyles have changed too to include children, schools etc. This is why areas out of London at present, where a house can be purchased at reasonable prices are growing which is giving flat sellers an option of leapfrogging the next larger flat move in favour of a longer term house move. This has been made possible with a much smaller price difference between a flat and house and the ability to fund that gap at low interest rates.

Although monthly it will make only a small difference, rates up and prices down is unfortunately not a great combination.

On the positive side, it means that buyers can push to get some fantastic prices if the time to buy now works due to the large monetary difference between monthly rent v monthly mortgage payments or if you are a homeowner upsizing.
Today's rate change will I think, for the person happy to buy, further strengthen the ability to negotiate a great price if you are wanting or needing to buy and get a home at a great price with still comparatively very low rates.

By Lionel Stoll
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