Consumer confidence in the UK property market has dropped for the second month in a row on expectations this week will see further interest rates rises, says the Woolwich.
The lender’s latest consumer confidence index suggests overall confidence slipped with 3% in July.
Last month, 62% of homeowners believed their house would continue to increase in value compared with 65% in June and 67% in May.
Andy Gray, head of mortgages at Barclays and the Woolwich, says: “This continued fall confirms our prediction that confidence would gradually decline as interest rates bite and people become more cautious about borrowing decisions.
“With a rate rise predicted this Thursday and a further rise before the end of the year we would expect this downward trend to continue until the end of the year,” he concludes.
That said, consumer confidence is still significantly higher compared with twelve months ago when it was down at 55%.
A Nationwide survey published last week also suggests Britons are still interested in the housing market as house prices rose by 2.1% in July, the biggest monthly gain since February.
The bank forecasts the UK will see another two quarter of percentage rises in interest rates before the end of the year.
The housing market may not be the only area affected by recent rate hikes. According to a report by BDO Stoy Hayward, looking at business trends, increasing interest rates have also affected British business.
BDO Stoy Hayward says output expectations have dropped for the first time in over a year, something which could imply that the rate of economic expansion could be slowing.
Calming fears the UK could be hitting an economic slowdown, BDO Stoy Hayward says business optimism is at a seven-year high, suggesting growth should still remain healthy over the next nine months.
Despite recent interest rates rises, BDO Stoy Hayward believes the Bank of England will seek to increase rates even more this month in an attempt to calm inflation.
Chris Grove, partner at BDO Stoy Hayward, says: "Inflationary pressures are running high which means that a rate rise this month is a near certainty. We could also see rises in September or October unless there is stronger evidence of a cooling housing market.
"The MPC will be walking a tightrope if it continues its pre-emptive strategy to manage inflation. Further rate increases will affect consumer spending, which has been the mainstay of the UK economy. And with an increasing interest burden, growing businesses as well as consumers could face problems," he adds.IFAonline
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