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Experts question effectiveness of base rate cut
11 April 2008 11:30
Mortgage industry figures have welcomed yesterday's base rate cut, but warned that declining credit conditions could limit the impact that this will have on the sector.
The Bank of England's Monetary Policy Committee voted on Thursday to lower the base rate by 0.25 per cent to five per cent, its third reduction in just five months, as tighter credit availability and slowing economic growth outweighed the threat of inflation.
Peter Bolton King from the National Association of Estate Agents responded that this decision would bring relief to consumers and help restore confidence to the market, but urged lenders to react accordingly by lowering their mortgage rates as well.
Yet Michael Coogan from the Council of Mortgage Lenders warned that the base rate does not indicate the cost or availability of funds to lenders and therefore called on the Bank to cut rates again next month and to also offer more liquidity to more institutions.
Michael Coles from the Building Societies' Association also noted that mortgages may not immediately reflect yesterday's base rate cut and told borrowers to ensure themselves that they can maintain repayments and to contact their lender if they have any problems.
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