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Base rate hold results in disappointment
9 May 2008 10:30
The Bank of England opted to maintain the base rate at its existing level yesterday, much to the regret of housing market stakeholders concerned about the sector's future.
On Thursday, the Bank's Monetary Policy Committee (MPC) voted to keep the base rate at five per cent, a decision that the Council of Mortgage Lenders (CML) and the Royal Institution of Chartered Surveyors (RICS) branded as understandable but disappointing.
They both argued that while the MPC's decision was driven by the need to keep inflation down, it ignored the issue of slowing economic growth, while RICS noted that house transactions, consumer confidence and employment have all come under threat as well.
Yet CML director general Michael Coogan stated that although housing and mortgage market conditions have become tougher, most existing borrowers are still coping well, while advising those who feel they may struggle to contact their lender or a debt advisor.
Moreover, Henk Potts from Barclays Wealth forecast that despite inflation remaining high for the remainder of the year, the MPC would continue to gradually reduce the base rate, which he predicted would fall to 4.75 per cent by the end of 2008.
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