The Bank of England raised interest rates this morning by a quarter of a percentage point to 4.75%.
Given the recent buoyancy of the economy and the housing market the rise is not a surprise, according to the RICS.
The residential property market has been in rude health in recent months with Nationwide reporting a robust monthly rise in house prices of 0.8 % in July while statistics for Halifax still show house prices up by over 8% in the year to July.
Mortgage approvals rose to 120,000 in June, still well above the long-run average and RICS estate agents confirmed that this trend continued into July.
Milan Khatri, RICS chief economist said: “The rise in interest rates comes against a backdrop of strongly rising employment and increasing spending on the high street.
“RICS does not believe that this rise will have any immediate impact on the economy or the housing market.
“However if interest rates were to rise further in the coming months, a slowdown in the housing market in 2007 is to be expected”.
Stuart Law Managing Director of property investment group Assetz was hoping rates would remain unchanged: “A rise in rates could damage consumer confidence and hamper our competitiveness.
“Eurozone and US rates have been rising quickly over recent months and the MPC should allow them to close the gap.
“It gets clearer by the day that significant immigration into our country is helping keep inflation under control without the need for excessive interest rate rises. We should let this new labour deliver productivity increases without great fear of wage rises to follow.”
References: EGi News 03/08/06
