Is the reduction in bank interest rate a worrying sign for first-time home buyers in the UK? The answer seems to be “yes” from a majority of prospective buyers.
This is because a cut in bank interest rate means slower growth of their all important deposit. To buy a London property a prospective buyer will need to put down a sufficient deposit.
The Bank of England recently cut the interest rate to 0.25 per cent – one of the lowest in the history of the bank. To some sectors of the economy this cut is welcome, but for home buyers in the age of group of 18-24 years it may prove even more difficult to acquire a property. According to research conducted by MoneySuperMarket, 21% of the people in this age group feel that their efforts to build up a deposit will be even harder.
Currently, the average age of first time buyers in London is 36 years+. This it is likely to increase if the interest cut impacts their savings plan. According to a conservative estimate, first time buyers will need a deposit of £24 to £33,000 to purchase a property in the UK. They will also need to take into consideration the prospect of a rise in house prices.
The cut in interest rates may not impact prospective home buyers who already have adequate savings. For now, prospective home buyers should adopt a wait and watch policy to see how the property market stabilizes over the next few months. It is likely that the banks could evolve a plan that might benefit potential house buyers.
Photo credit: Homeowners Alliance