- A weak housing market could knock a percentage point off real GDP
- Higher rates are starting to hit transactions
It takes more than 18 months for the full force of rate rises to hit the economy – and a year and a half ago, interest rates were only 0.75 per cent. There is a lot more monetary tightening yet to pass through, and the housing market is already feeling the impact.
Average mortgage rates have risen from a low of 1.3 per cent two years ago to over 5 per cent, worsening an already bad affordability picture for would-be borrowers. Analysts at consultancy BuiltPlace point out that they are also still “facing all the preexisting issues around the cost of buying (big deposits, higher incomes etc)”. As a result, activity has stalled.