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Rate rise rocks housing upturn

STRUGGLING house builders are reeling as another interest rate rise threatened to rein back the market at the start of the selling season.

Chancellor Kenneth Clarkes claim that the rise was needed to keep inflation under control cut no ice with builders as starts, prices and buyer interest slumped again.

The rise took interest rates to 6.75 per cent, still well below the 15 per cent level which triggered the recession in 1989.

Latest government figures showed that 201,500 new homes were started last year, including 160,000 in the private sector, the most since 1989.

But there was a January slump, according to the National House Building Council which registered 12,700 new starts 21 per cent fewer than in January 1994.

And the House Builders Federations figures showed that both the number of buyers deposits and site visits fell in December, the first month-

on-month fall for two years.

Prices fell in December for the fourth month running.

David Bottom, chairman of Laing Homes, said: Government polices are having a really adverse effect on buyers. It seems that just as we enter the selling season we get clobbered. Every six weeks something comes along to hit us.

Alan Cherry, chairman of Countryside Properties, said: The Bank of England is obsessed with the possibility of a return to the boom, but it has gone too far in the other direction. It hardly shows the government as the friend of home owners.

Terry Bugg, deputy general manager of Suffolk-based Bennett Homes, said: This is hitting the feelgood factor. Mr and Mrs Average have only just found their mortgages affordable again.

David Holliday, chief executive of Admiral Homes, said middle market sales were firm, but mainly because of those who move due to personal circumstances. Were not getting the discretionary buyer, he said.

There was slight optimism from Tarmac Homes director, Roy Harrison, who said: The latest rise in mortgage rate does not change our view that there will be slow growth in housing demand and some recovery in prices this year.