Rate rise 'puts off' first-timers

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The threat of higher interest rates is putting off some potential first-time homebuyers, a survey suggests.

Of 3,500 house-hunters interviewed by Yorkshire Bank, 18% of the first-time buyers were considering shelving plans to move because of a rate rise.

Among those who had previously bought a property, the figure was only 10%.

The Bank of England kept rates on hold at 4.75% this month but there was a rise in August and many economists expect a new hike in the coming months.

About 70% of those surveyed also believe a further interest rate rise will take place.

Gazumping fear

According to the Yorkshire Bank, the prospect of higher rates has seen a rise in the number of people reviewing their mortgages, with fixed rates growing in appeal.

One in four first-time buyers are also looking at fixed deals, an increase of 13% since July.

Buyers aren't just continuing to search for houses without considering the financial implications of the higher rate of borrowing Gary Lumby, Yorkshire Bank <a href="/1/hi/business/5409596.stm" class="">Interest rates unchanged </a>

Meanwhile, the survey appears to show confidence in the market remains high with buyers are becoming more worried about being gazumped.

Fewer than 20% surveyed said they would offer below the asking price, down from more than 25% three months ago.

"With many predicting further Bank of England rate rises, it is pleasing to see that buyers aren't just continuing to search for houses without considering the financial implications of the higher rate of borrowing," said Gary Lumby, head of retail at Yorkshire Bank.

The survey comes after research for Scottish Widows found high house prices, combined with student debts, are pushing property ownership out of the reach of many graduates.