The relationship between interest rates and housing markets is a recurring theme in IELTS Writing Task 2, appearing in various forms over the past five years. Based on analysis of past exam questions and impact of changing interest rates on housing, this topic has featured prominently in questions about economics, social issues, and government policies.
Let’s examine a recent IELTS Task 2 question that exemplifies this theme:
Some people believe that rising interest rates help control housing prices and make homes more affordable for first-time buyers. Others argue that higher interest rates make it harder for people to buy homes due to increased borrowing costs. Discuss both views and give your opinion.
Analysis of the Question
This question requires:
- Discussion of both perspectives on interest rates’ impact
- Analysis of affordability factors
- A clear personal stance
- Relevant examples and supporting evidence
Sample Essay 1 (Band 8.5)
The relationship between interest rates and housing affordability is complex and often debated. While some argue that higher rates help moderate property prices, others contend that increased borrowing costs create additional barriers for potential homeowners. In my view, while rising interest rates may temporarily cool the housing market, they ultimately make homeownership more challenging for most buyers.
Those who support interest rate increases point to their effectiveness in controlling property speculation and how inflation influences real estate market. When rates rise, investors are less likely to purchase multiple properties, reducing competition and potentially lowering prices. Furthermore, higher rates can discourage excessive borrowing and prevent dangerous housing bubbles from forming.
However, the impact of high-interest rates on borrowers is often severe, particularly for first-time buyers. Higher rates significantly increase monthly mortgage payments, requiring larger down payments and higher income levels to qualify for loans. For example, a 1% rate increase on a $300,000 mortgage can add hundreds of dollars to monthly payments, making homeownership unattainable for many middle-income families.
In my opinion, while rate hikes may temporarily reduce housing prices, the increased cost of borrowing typically outweighs any benefits from lower purchase prices. The solution lies in implementing comprehensive housing policies that address supply constraints and promote affordable housing development, rather than relying solely on monetary policy tools.
Sample Essay 2 (Band 6.5)
Interest rates have a big effect on house prices and buying homes. Some people think higher rates make houses cheaper, but others say it makes buying harder. I will discuss both sides and give my opinion.
When interest rates go up, some people cannot buy many houses for investment. This means less competition to buy houses and prices might go down. Also, banks are more careful about lending money, which stops house prices from going too high too fast.
But higher interest rates make monthly payments bigger for people who want to buy homes. For example, if someone borrows money to buy a house, they must pay more every month when rates are high. This makes it harder for normal people to buy their first home, even if house prices are a bit lower.
I think higher interest rates usually make it harder to buy houses because the monthly payments are too expensive. Governments should find other ways to make houses affordable, like building more houses or helping first-time buyers with special programs.
Analysis of Essay Scores
Band 8.5 Essay Features:
- Sophisticated vocabulary (speculation, monetary policy)
- Complex sentence structures
- Clear organization and cohesion
- Specific examples and detailed analysis
- Balanced discussion with clear position
Band 6.5 Essay Features:
- Basic vocabulary
- Simple sentence structures
- Clear but basic organization
- General examples
- Understandable position but less nuanced
Key Vocabulary
- speculation (n) /ˌspekjʊˈleɪʃən/ – investment with risk
- monetary policy (n) /ˈmʌnɪtəri ˈpɒlɪsi/ – central bank actions
- attainable (adj) /əˈteɪnəbl/ – possible to achieve
- comprehensive (adj) /ˌkɒmprɪˈhensɪv/ – complete, thorough
- constraints (n) /kənˈstreɪnts/ – limitations or restrictions
Remember to practice writing your own response to this question and share it in the comments section for feedback. Future IELTS tests may feature similar questions about the impact of mortgage defaults on banking system or other economic relationships affecting housing markets.