It came as economists warned that middle-aged homeowners will bear the brunt of rising interest rates as the looming mortgage crisis unfolds. Paul Johnson of the Institute for Fiscal Studies think tank told the Treasury Select Committee that “middle-aged and middle-income” borrowers could be particularly hit by higher interest rates.
He said: “Anyone with a mortgage will be worse off. People who have purchased more recently will be more affected as they tend to have larger debts. But anyone who owns it will be affected in some sense, as their wealth will likely decrease as a result.
Torsten Bell, from the Resolution Foundation think tank, told MPs the effect of rising interest rates on UK households would be “very significant”.
Mr Bell said: ‘I fear middle-aged people are set to have particularly big hits because they don’t tend to own their homes and use more personal debt in general . It’s not about big increases in the level of debt, it’s about rising interest rates and how that impacts.
Rics found that new buyer inquiries fell for the fifth consecutive month, with every region of the UK seeing a slowdown in demand. Despite the drop, demand outstripped supply in the three months to September, with inventory levels at an all-time low, pushing prices higher. Rics said estate agents only hold an average of 34 properties, with new instructions also dropping in September.
Simon Rubinsohn, chief economist at Rics, said: “The storm clouds are visible in deteriorating near-term price and sales expectations. Looking further, the picture painted by the survey has clearly shifted in a negative direction.
He added that mortgage arrears and foreclosures were still at historic lows but will inevitably increase over the next year.
The impact of interest rate hikes should outweigh any potential boost from the stamp duty reduction announced by the government, Rics said.
Paul Lynch, of Romans estate agent in Guildford, said the economic challenges were “clearly affecting the housing market”.
“Buyers are now telling us they’re going to sit back and delay buying for three to six months and then look at the market,” he said. “Ongoing sales are also affected and some buyers have withdrawn or reduced their offers.”
Oliver Miles, who runs an estate agency in Swanage, Dorset, said price cuts were becoming commonplace. “With the financial crisis and the general economic outlook, a fall in prices seems likely in winter,” he said.