Do you not think that by doing this it will be even harder for us mortals to save any money. I am married with three young boys living in a four bed detached house in Dunfermline. My mortgage is higher than the one mentioned above, if the interest rate goes up as mentioned I will have even less money to put into savings. Your comments would be much appreciated.

The rise in house prices is stupid but surely instead of raising intrest rates to make owning a home unaffordable, surely there should be some sort of government iniciative to kurb the ever spiralling prices.

Prices are high because there are not enough houses?...untrue; there are enough houses only they are all bought up by greedy and over zealous property developers with buy to let mortgages. If you were only allowed to own 2 properties...let's face it, how many more do you need?...then you would find that suddenly an influx of homes suddenly become available and there would no longer be a 'shortage' and prices would come down.

Just a thought....comments welcome

I wish for once people would think of the less fortunate, the ones with little or no disposable income. After paying my mortgage and bills I have little left that would be more than eaten up with the 8% let alone 10% increase and I bet I'm not alone, with no luxuries such as Sky I am already going without what others would regard as essential and this would mean me not earning enough money!!. And when I have a wife and 2 children to support the interest rates need to be reduced not increased !!

I have to disagree with Cassie's assessment of the housing market and suggest that in all probability, as a percentage of the house purchase market, the number purchased as an investment opportunity (buy to let)is relatively small. It is difficult to reduce the problem of house price inflation to one specific cause but, just like any other commodity, the housing market is subject to the economic principal of supply and demand. Demographics and to some lesser extent topography also play a part, evidenced by the North South divide - although this has narrowed substantially over the past decade. However the overriding fact is that not enough new houses are being built where the demand is greatest. We are therefore faced with the following choices 1. Encroach upon greenbelt land for building purposes and accept that City suburbs will grow continuosly but demand will be met and house prices could stabilize or 2. Accept that demand will continue to outstrip supply, an ever increasing population will need to be housed somewhere whether it be through ownership, private rental or local council properties, and therefore the house price curve will continue upwards, albeit with the occasional painful blip. I am sorry if this appears to over-simplify a very difficult subject but I am quite certain others may have some comments to add.

I definately agree with cassie. The price problem is due to lack of supply, and high demand.

The lack of supply is due to property developers grabbing all the available properties and using buying houses as a business, while most people try to use them to live in! The high demand is due to the attractiveness of investment potential in buy to let.

In my opinion the sole use of "property developing" for income is immoral. If the number of properties was limited to 2, people could afford one to live in and one as an investment, and the supply would probably be enough to mean prices didnt increase too much.

Unregulated buy to let is the problem. Not interest rates. If you hike interest rates it will not only evict thousands through forced reposession, but will push the divide between rich and poor even further, meaning even more proerties are bought by city workers bunuses, and less by the normal working person.

Dont hike up interest rates, it will cause more of a problem. Regulate the housing market. Why doesnt anyone talk about regulation as a tool, rather than brute force tactics such as interest rates? I am not a socialist, but I do believe that we cant leave the entire economy to be run by market forces. It means people can exploit weaknesses in the system such as this.

I also agree with Richard. The view saying interest rates should be increased is thinking from the side of the investor, not the buy to live in. Most people aside from the greedy would be happy if you were only allowed to buy properties for personal use. The goverment do it with buying booze from france why can they do it with houses? Then we can all afford soewhere to live.

People dreaming of a property empire where they dont have to work anymore, should just have to go out and get a normal job like the rest of us. People using property to get the best return for their excess money will just have to get a normal return on it from some other kind of investment, that doesnt effect the majority of peoples basic need for shelter, and long term stability.

Rant over.

A rise in interest rates to even 8% would absolutely cripple us. We have 2 children not yet at school and we both work, and yet to afford a family house (3 bed semi - not extravagant) we have had to go self cert, interest only, with the vain hope that when the kids start school I will be able to work full time again and we will be able to switch to repayment. Where we live in the West Country the problem is not only but to let investors but people from London and the Home Counties who have made a small fortune due to the boom buying second homes down here which are rarely used. It is sickening to see houses sitting empty when I have friends who cannot even get a foot on the ladder. I can't afford to live in the village I grew up in because a 2 bed cottage alone would be more than we could afford. There needs to be restrictions on buying second homes and investments not an interest rate hike. For example instead of building local authority houses on all new housing developments, restrict investment buyers from buying them.

"People don't bother to save because they rely on rising house prices to give them wealth without lifting a finger. That means when they get to old age they won't have enough to live on, or they will have to withdraw equity from their houses to keep going"

This is the crux of so many arguments taking the position that the current market is a bubble. It's a shame that people in England aren't saving much but people in the U.S. probably save even less. A main difference between the two markets is that in the States there is no policy curbing home building, and so they have bubbles...that burst. Home building and home prices are a part of a cycle. Here, not enough homes are ever being built and so demand is kept high.
Demand here is kept high because the aristocracy here owns your flat. Your freeholder doesn't give a damn about your mortgage payments, but skyrocketing values ensure the wealth of their offspring.
I live in London, and from my perspective there's nothing at all to stop the growth of house prices because we're not competing against other Londoners in the bidding. Foreign investers snap flats up before they ever reach the market, and highly paid talent keeps arriving from overseas to fill highly paid positions and they grab up what's left. There will be no end to this, as London is one of hubs the world spins around, the english-speaking center of Europe, and the undisputed financial capital of the world. The English stand no chance of keeping a hold on their property as long as hold out, whinging about the inevitability of a crash. The world is prepared to pay more than you.
The price of property in the U.K. (and most certainly in London) is not just high because the aristocracy here wants it high, a whole world of investors banks on it, and that sort of pressure is more than the bank of england can take on.
How about making renting more affordable? In a country where most homes will be bought from the English Aristocracy by the Foreign Rich, provisions will have to be made to house the people who actually live here. Why is council tax paid by renters when its the owners who benefit from the increased property values it generates (Olympics)
Why do the English put up with the Freehold system? Why do we accept that the grandchildren of our freeholder deserves the wealth we put into our property more than our own progeny?

Or is this the only way we've found to ultimately keep English property in the hands of the English?

It need the goverment to place harder restriction on property development companys. ie they need to also build schools, doctors surgery and other local eminaties for free on an estate for the amount of houses that are built( Cutting the profit line for the companys).
The Bank of England need to RASIE

So what would happen to all those who simply could not afford such a rise? Surely the effect of so many people simply not being able to pay their mortgage each month and having their houses reposessed is going to have a rather serious effect. The only people who will prosper will be the landlords, as we'll all need to go back to renting!
The second home owners with cash to by up their holiday homes and buy to let investors are a force to reckoned with in the west country. How about upping the council tax on second homes? Make those empty houses work for the community that they leave behind.
May be the government could consider the wages for key workers. Wages simply do match the house prices where I live. Upping the interest rate will mean 20 somethings like myself are near ruined....

Please,let someone do something now before its too late, if not too late now.Now i have a mortgage of £189,000 and am paying over £1300 interest only, now tell me how much will i be paying with rates going up, and with 4 children to support how do they want us to live let alone having a saving.
They should see that expenses are all going up while income is either going down un stagnant.
I went to the court in Jan. 2007 out of 64 cases in that one single court 62 of them are on repossession. someone should do something, not another interest rate rise

It need the goverment to place harder restriction on property development companys. ie they need to also build schools, doctors surgery and other local eminaties for free of charge on large estates over a certon amount of houses that are built( Cutting the profit line for the companys).

The Bank of England needs to RASIE the intrest rates to at least 8% to slow borrowing. There is going to be people who loss there home due to mortgage payments but it needs to happen soon as Englands acconamy will suffer in the long run due to the high amount of borrowing (The morgage loans are not classed as borrowing on the reports that hit the headlines). It works out to be between 15,000 and 20,000 thound pounds per person over the age of 18 and under the age of 65 in england. That amount needs to be cut to stop alarger disaster happening that may cut jobs and really harm the acconamy in the long run.

There also needs to be higher taxes on people who own three or more houses for any reason.
BUT the goverment need to LOOK AND FIX the pension scheemes. Pensions need to be protected so poeple have a viyable option to putting money into property. (Sorry for the spelling).

High interest charges are not the answer, we live in a now society were young people are not willing to wait or save for anything now now now, the housing market is totally dependant on first time buyers, if you can't sell your first property you can't buy your second, so lets get back to common sense and make first time buyers save a 10% deposit instead of borrowing 105% the value of their houses, this would slow down the house market and make it possible for our grand children to afford a house in the future

Mick

History is the best teacher.Has anyone any opinion about what lead to the fall of property market in eighties? Was it just because of US economy fall resulting in global effects or anything to do with our economy? Is there any similarity with the present scenario?

Okay, enough of the 'greedy property developers' rants. First of all lets have a brief lesson on the English language. Property developers BUILD properties, property investors BUY properties to LET OUT. Now we have that sorted, I am a property investor and I would like to get some other things straight.
Firstly, I own 5 buy to let properties which I have accrued in order to fund my retirement. Having spent the best part of my (self employed) working life in a 'normal job', working upto 14 hours per day and being rewarded with 40%+ tax bills, I need some way of funding my retirement.
Secondly, not everyone can afford to buy a home of their own. There is a huge demand for rental properties, and I am merely providing a service to some of those people. My tenants have included students, single mothers and temporary workers who have appreciated the convenience of a place of their own without having to worry about the commitment of a mortgage or the unexpected cost of a broken boiler.
Thirdly, if you knew anything at all about property investment you would realise that there is a lot of work and expense involved in being a landlord. Yes, hopefully there will be a capital gain at the end of the day, but believe me, it will have been well earned.
Finally, Council tax is to pay for services provided by the local council, ie rubbish collection, the provision of schools,libraries and leisure centres, street cleaning etc, all the services available to a tenant and not the landlord, so why should the landlord have to pay for them?
Yes house prices are rising, but perhaps that has more to do with the growing population of the country and the increase in new households.
Give us a break, eh?

I read all of the comments with interest.

The collapse will happen and it will be spectacular. 2009 bang!!!!!!!!!!!!!!!!

The only way to stop a property collapse is by taxing individuals on profits made from the sale of there property unless they re-invest in another property.
However that's not exactly an election winner.

The property crash will signal a big recession.
Combined with the ever increasing amounts of new eec members to the UK will see large unemployment.

This government continue to squeeze every last penny from the hard working families who are trying to support their lifestyle. I am married with three children and work full time as does my husband. Holidays for us are if we are lucky once every two years. We dont have 'spare' money to save with. Why? utility bills spiralling upward, cars to run,grocery shopping has become more expensive, but neither my wages or my husbands have increased. Then the government are proposing a new tax, one that decides whether you should pay more because you have a nice kitchen, or double glazing or perhaps its nice and quiet where you live so you should pay more for that!! we are seriously considering selling up and moving abroad as this country is taking everything from those who work hard. Meanwhile on the other social scale, dont work, you'll get a house and enough in benefits to prevent your need to find a job and work. These interest rates really put too much pressure on an ordinary working family who are trying desperatly to provide a decent, not extravagant upbringing for their children. What will their future be like? the thought scares me...

I agree with most of what everyone has said, each point is a valued one, altough, the people are the ones who are going to get hurt you rise interest and more and more people lose there houses, and then were do those people go, and what happens to the houses, the investors once again buy, cos they can. And the whole circle starts again, it will be like the 80's, then everyone looks at re-building the economy again, WHY? you need to get it right this time or it will just continue generations after generations, there has to be limits on house buying, they say they have to increase interest cos no-one is saving, so if the rich people did, and not on scarce homes, then the economy would not be hit as hard, and everything would stablise. I myself would lose my house, which i have worked hard all my life for.

So Cassie and Ed, where do you suppose people who need or choose to rent property would live if no-one was able to purchase property and let it out????? In cardboard boxes????As a matter of fact, rising property prices do as much to prevent landlords purchasing as anyone else, if rental potential is less than the motgage it makes property a poor investment unless long term high level growth is anticipated. See the bigger picture.

My mortgage at present is affordable, although I have to budget very carefully with other areas of my expenditure, Both myself and my husband work hard,to support our family, and at the end of the month we have a certain amount of income left over to live on for food etc, If interest rates were to go up to 8% or more, we would be in for a real struggle with our finances, Our only option would be to move house, but with selling fees, stamp duty etc it is a no win situation, We are hoping for interest rates to fall, Is this wishful thinking!!!! These are worrying times.

You forget guys and girls about the other acting prop of the ever rising house price , it's the ""interest only repayments"" option , which loads of buyers are using as an option to get on the ladder . Its the panic option which has big effect on the market , and its not just with the buy to let market because a large number are using it on their residential too . The lender loves it and the big boys are coining it in , very sad but true..

I only gave half a story in my first comment, the pound is already very strong but interest rates at the levels suggested would make it much stronger our ability to compete in world markets would be severly damaged companies would be forced to lay off workers taxes would have to rise to pay for the mass unemployment even more people would be unable to pay their mortgages and the whole ecconomy would crash as it did when high interest rates were used in the past,ecconomists should be historians too you don't have to look back very far to see the effects of playing with interest rates in my opinion a Law should be passed making it illegal to raise the base lending rate above 7% even that would hurt more than that is a recipe for disaster.

People can only save from surplus income (that which is left after all the essential outgoings are met) if interest rates are raised to the levels sugested by Martin Weale the effects would be that most people would have little or no surplus income to left to save and many people who have just got on the mortgage ladder will be unable to make their payments at first they will stop any saving they were doing including any pension contributions they can get out of but if rates stay high for a long period many will face reposession as they did in the 90s I believe that Martin is from a privilleged background and has no notion of how life works for people who have to think about money on a purchase by purchase basis it's also posible that he is deliberatly manipulating the market with rumours for personal gain.

The rise in property prices is fuelled by raw greed and selfishness. Young people on basic wages are not considered by those anxious to own more than one home. This is the result of a greed economy that will disenfranchise large parts of the younger generations.Making money at the expense of other people has now moved from exploiting other countries (eg 3rd world Africa)to now include our own economy.The example is set by the Prime Minister and most celebraties and the well heeled.
Communities are being demolished by buy to let and second holiday home owners. There will be a price to pay for this in the future....socially and politically.
Significant interest rate rises may be the only way to halt the 'because I'm worth it' economy!
Nothing lasts for ever! Does it?

I own a few properties and have been investing and studying markets for about 8 years,i have 3 young boys (oldest 5) and sympathise with other comments as i was in that situation before i invested.
I had taken risk when i started out and was rewarded for it...Everyone has the same opportunity in life when we leave school,some people decide to play safe and take no risk in life and moan about what they could have achieved (sat night in pub after 10 pints when they are 65)and others go for it with the knowledge that its better to have tried and failed than not to have tried at all! The goverment want people to be in debt so they have control over you (ie Tax credits ect,they take the money off you then ask you to beg for it back and give them all the personal details they require to watch what you are doing.)
Unfortunately we now live in a semi-communist country heading for full dictatorship,we give them all our details and money and they give us pocket money and this ensures we dont no longer leave for spain and build their economy.
A lot of wealthy people have already left this sinking boat and usually they are wealthy with brains and ex business owners (or developers)....which leaves the 2 classes behind...the Working class struggling with high taxes and the unemployed..both cant leave?
So i agree with nigel and i class myself as experienced as i have lived in Athens and Eastern europe doing business.
They're will be a bang! in 2-4 years and when it happens the economy will never fully recover but it will strengthen the Euro market who already own our airports,car manafacturing ect.
My prediction is the goverment will not raise interest rates to 8%-10%, because it will bring it on prematurely and will not want history to say it happened when labour were in power...instead they are building towards it with the knowledge that the conservatives will suffer it and take the blame.Then they can torment them for the next 20 years or so when they act like children in parliment?
But i am building business in the next england where my children will have a better life and property is on the down at momment.
I feel sick when i think i am a englishman with no england and no choice but to leave? i feel for those left behind struggling with communism, time the english became English again and vote for anyone who wants to put it back where it were (not labour,cons or lib),then maybe my children will speak english when they are older.
Close the borders and then theyre will be enough houses!!!!More to life than money and economy!

I have returned to the UK after 9 years overseas. I also am a first time buyer aged 33 and sadly, as I see it, the only sensible way I can see to get onto the property market in this climate is via the buy to let model. Otherwise, I just don't think it's worth trying to make a living in the UK.

I worked very hard in my 20's building 2 businesses, one of which collapsed and neither of which sold. Because of that, I understand the insecurity of conventional ways to plan finacially. The UK has become so expensive to buy a home and to live in since I left in 1997 that I am gonna compromoise my socialist values in order to look out for myself and my hoped for future family. The way I can do that without prostituting myself to work for the government's interests is via property investment.

Yes, it is the lazy but also an increasingly risky way to make wealth for myself. Life is full of compromises and I am happy to make that compromise. All the points raised for and against property investors I can see truth in. Such is life!