Hi Louise, I feel strongly based on my experience pf 26 years as a vet nurse that pet dogs should ALWAYS be neutered when 6 to 8 months old...then the situation you have mentioned wouldn't occur in the first place. But as we're a bit beyond that stage then yes, he is reacting to a bitch in season in his 'territory ' as he sees it. Entire males can smell bitches in season miles away so next door is kind of frustrating him big time. Unless he is like this constantly then no he is not just reacting to a dog next door, it is specifically becuase he is not neutered.If you have him neutered now he will calm down and be less territorial in time which will be alot less frustrating for him and he will be cleaner in the house. Cost shouldn't be a factor not to neuter, if he accidently got out and sired a litter of pups how much would it cost to see those pups thru their lives?Not to mention the nightmare your dog would become if he actually did manage to experience mating, he would then become a raging sex maniac and his character would change for good.If you are on a low income contact Dogs Trust who give financial help for neutering dogs as they see it as essential pet care and so do I! It's a simple op ,shouldn't be more than �60 full price for a Yorkie and he'd be much better off without the frustration of bitches in heat in the neighbourhood!Not to mention removing the risk of some common cancers in his later years.By the way, why is the bitch next door not spayed anyway?! Rescue centres in this country are overflowing with pups and dogs just because we aren't spaying and neutering pets. All my 6 dogs are done and were all done as soon as they were old enough.What do you think?