View more on these topics

Baseline move won’t rally the home market

Mortgage industry figures believe the Bank of England monetary policy committee’s decision last week to cut interest rates by just 0.25 per cent to 5 per cent will have little impact on the market.

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.”

Recommended

7IM adds passives to range

Seven Investment Management has introduced a range of risk-graded funds of funds that use passive investments such as exchange-traded funds rather than actively managed funds.

The Day of (B)reckoning

A period of exceptional uncertainty started last Friday for the UK, including a fierce leadership battle in a deeply divided Conservative party, the timing of the trigger of the EU’s Article 50, as well as a potential referendum in Scotland, and Northern Ireland. Click here to read the full article

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com