WELCOME to my new monthly look at the financial world - and thanks to all who responded to my Evening Press plea for your help.

I've an obvious first theme - the impact on house prices in the local property market from the first rise in interest rates for almost four years.

A 0.25 per cent increase doesn't seem significant, but it will surely resonate in the markets because it implies that the trend in interest rates is upward.

The pundits have all been busy trying to factor-in the change on their predictions for where rates are going, and their consensus appears to be that we could be looking at rates of about five per cent by the end of next year.

That would represent an increase of 30 per cent on the 3.5 per cent rate we were enjoying until recently. Such a major change would add about £125 per month on to the cost of a £100,000 mortgage. Enough to finally prick the bubble of the property boom? Don't be too certain.

Barry Crux, a York estate agent just elected as president of the 27-member York and district Association of Auctioneers, Valuers and Estate Agents, tells me that it's a hugely resilient bubble!

He says that although prices stalled in the region late last year with the suspicion then that they had peaked, it turned out to be a blip. Since then values shot up by some ten per cent and were still increasing.

Barry expects the annual increase may yet achieve the heady heights of 15 per cent for 2003. The only note of caution seems to be a potential over-supply in the local buy-to-let market.

Historically, a five per cent interest rate is not high. Once we eventually adjust to the change from the exceptionally low interest rates of recent years, it could be a case of "business as usual".

So where does that leave the folk of York and North and East Yorkshire? Well, doing very nicely if they own a property, but not so happy if they want to buy - particularly if they are first-time buyers.

And here, let's talk mortgages. Don't forget your home is at risk if you do not keep up the repayments on a mortgage or other loan secured upon it For the young and those on low-to-average incomes, obtaining a mortgage big enough to buy the home they want is increasingly difficult. Property prices may be rocketing but, unfortunately incomes and the multiples of them used by lenders are not. Other options are some form of "shared-ownership" (buying with friends or using an equity-share scheme), borrowing a large deposit from a generous relative or looking to rent.

Reader Tim Baker contacted me to ask - is this a good time to re-mortgage his home? If so, what should he think about when considering a fixed or discount loan?

Affordability. As house prices shoot up, many people now have considerable equity in their own homes. "Releasing" some of that through a re-mortgage is among the cheapest and most straightforward means to raise capital. Provided the current and likely future repayments are affordable, the major choice tends to be between fixed and discounted schemes. Deciding between them is not clear-cut. It depends on the outlook for interest rates

Keep those questions coming...

David Holbrook

Managing Director

Hallmark-ifa, Club Chambers, Museum Street, York YO1

david@hallmark-ifa.com

Phone: 01904 630333

Updated: 09:35 Tuesday, November 25, 2003