High interest rates could affect the UK housing market.
According to Nationwide, high-interest rates will hit the market in December.
The Nationwide Building Society has said that there could be a “cooling” of the hot UK property market due to rising inflation and interest rates.
Robert Gardner, a chief economist at the UK’s second-largest mortgage lender, said the housing market is currently “remarkably strong” despite the end of incentives such as the government stamp tax holiday in late September.
However, he said that in the coming months much will depend on the performance of the economy in general.
“There are some things that could moderate [housing demand] a bit in the coming quarters. For example, there are not many homes on the market right now. That is likely to slow down activity.
“If you look at rising inflation that is tightening household budgets a bit, and if interest rates go up, that is likely to have a refreshing influence as well. But if the recovery continues, activity is likely to remain fairly strong.”
Earlier this month, Halifax said house prices had hit a new high in October, rising above an average of £ 270,000 for the first time.
However, although the Bank of England decided this month to keep interest rates at a record low of 0.1%, it could increase borrowing costs in early December, amid falling unemployment and higher inflation.
Last month, the Bank’s chief economist, Huw Pill, said he expected to see inflation above 5% early next year.
Earlier this week, the Office for National Statistics reported that inflation in October reached its highest level in a decade. A sharp rise in gas and electricity prices raised inflation, as measured by the consumer price index, to 4.2%, down from 3.1% in September, the highest rate since November 2011. The target Bank of England’s official inflation rate is 2%.
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