Interest rate hikes - First-time house buyers worse off

DOUBLING the rate of mortgage interest relief over seven years for first-time house buyers in this week’s Budget was welcomed, but within hours a distinct dampener was thrown on the gesture by the announcement of the European Central Bank (ECB) that it is raising its benchmark interest rate by 0.25% to 3.5%, the highest it has been in five years.

The rise does not wipe out all of the gain made by first-time buyers in the Budget, but when taken with previous interest rate hikes, it means the first-time house buyer is actually worse off than at the same time last year.

The latest rise in interest rates is the sixth in 12 months, and there is no end to the rising rates in sight. Economists, who expected yesterday’s announcement, are predicting that interest rates will go up again in February or March of the coming year. Since the latest rise was so confidently expected, some of its impact may already have taken place.