28 Aug

Nationwide: Jump in prices due to interest rates

Nationwide: Jump in prices due to interest rates

The exceptionally low level of interest rates offers some explanation for why house prices have not repeated the very sharp falls of 2008, according to one property expert.

Martin Gahbauer, chief economist at Nationwide building society, said that there are two main channels through which the low level of interest rates has impacted the housing market.

His comments follow an announcement from the Bank of England's Monetary Policy Committee, which revealed that it had decided to leave interest rates unchanged at 0.5 per cent - the lowest rate ever in the history of the bank - despite further signs of recovery in several key economic indicators.

"First, mortgage payments for existing homeowners - especially those with tracker or standard variable rate loans - have been reduced substantially," stated Mr Gahbauer.

Secondly, the fall in debt servicing costs has meant that fewer homeowners are under pressure to sell, so fewer second-hand properties have come on to the market, he claimed.

This in turn has contributed to moving the balance of supply and demand more in favour of sellers.

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