Hamptons managing director Jonathan Cornell says lenders’ funding costs are not linked to the bank base rate and they are severely constricted due to the liquidity crunch so new mortgage rates are not going to fall.
The Council of Mortgage Lenders believes that ano- ther base rate cut next month together with with more liquidity auctions, such as hig- her amounts over longer terms and available to a wider range of institutions, could help the market.
CML director general Michael Coogan says the base rate cut is good news for borrowers with mortgages tracking bank base rate “but in these dysfunctional market conditions, the base rate is not in itself a good guide to the cost or availability of funds to lenders”.
He adds: “To improve the market in which lenders are operating and restore consumer confidence, the Bank of England needs to coordinate successive base rate cuts with further injections of more widely available liquidity.”
Legal & General director of mortgages Ben Thompson says: “Current credit conditions have resulted in more tiered pricing for mortgages, which means that anyone with less than a 25 per cent deposit is facing a higher rate than they would have done over the past six months.”
“While lenders make it more difficult and more expensive to take out a mortgage, the ripple effect on fixed rates resulting from a change in the base rate is limited.”
Thompson points out that fixed rates are more in line with Libor, the inter-bank lending rate, which remains 0.75 per cent above the base rate. He says: “Until credit for the lenders becomes more readily available, those looking to buy a house or remortgage will continue to feel the pain.”