FOR IMMEDIATE RELEASE
Based on the level of mortgage borrowing they have managed over the past three years, both for home ownership and for buy to let investments in the domestic and commercial markets, Mayfair believes that a material number of borrowers will simply not be able to make repayments from their existing budgets if interest rates go up. This would lead to an increased number of properties coming to the market at discounted prices, having the effect of dragging prices down across the board. They believe that for every 1% increase in interest rates, prices will, on average, fall by 5%.
Guy Moliterno, Managing Director at Mayfair, says, ' Mortgage borrowers have become accustomed to low interest rates and have built their budgets accordingly. Looking at the mortgage applications we have handled over the past three years, borrowers, particularly the newer ones, have little spare capacity to be able to manage increased mortgage costs and, if rates rise, we should expect defaults and repossessions leading to fire sale prices. Similarly buy to let and commercial property investors will find their costs exceeding their income and are likely to offload parts of their portfolios.'
Mayfair's best advice to the MPC is to leave rates unchanged for the foreseeable future, and let the government manage any inflationary issues through the tax system. 'If they do move to increase rates, then only by the Government reintroducing MIRAS, or some other form of mortgage relief, will they be able to stop a new property price crisis.'
Mayfair is a leading provincial mortgage and insurance broker, covering commercial and domestic mortgages, and motor, home and left insurance. Established over 30 years Mayfair's experience sees it recognised as a leading commentator on the impact of interest movements on house prices.