View more on these topics

‘Market conditions may prompt cut in base rate’

Mortgage experts believe that the next move in the base rate could be down after the Bank of England’s monetary policy committee held the rate at 5.75 per cent last week.

The decision was widely expected after inflation fell in July to 1.9 per cent from 2.4 per cent in June, below the Government’s target rate of 2 per cent.

Council of Mortgage Lenders director general Michael Coogan says any rise in interest rates would have risked exacerbating the liquidity problems being seen in parts of the market.

He says: “At the same time, there is now much clearer evidence that the cumulative effect of five rate rises since last August is slowing activity in the housing market. The bank is right to wait and see. If market conditions produce a further tightening of credit, it will strengthen the case that the next decision should be that rates go down, not up.”

John Charcol senior technical manager Ray Boulger says: “The MPC’s decision to leave base rate unchanged at 5.75 per cent was regarded as a foregone conclusion by the market. However, the minutes of the meeting, due out on October 18, will be awaited with far more than the usual interest in the hope of getting a better insight into the bank’s latest thinking on the credit crunch.

“I expect the MPC will have discussed the possible need to cut bank rate sooner than previously expected as a policy response to the credit crunch and their thoughts on this will be interesting.”

Alliance & Leicester director of mortgages Stephen Leonard says: “For borrowers, the rate decision will be a welcome relief. For borrowers needing financial security and the ability to budget for their outgoings, a fixed-rate mortgage will prove invaluable. However, for borrowers who are financially flexible, tracker mortgages can still offer good value.”

Recommended

The real rate of return from ‘high-interest’ accounts

Banks are currently offering accounts, where, in return for a monthly saving of £250, there is supposedly a yield of 8 per cent. What the banks conveniently fail to point out clearly is that this rate only applies to the first month’s contribution. The rate applicable to the second contribution is, of course, 11/12ths of […]

Broker Talkback

Do you agree with the FSA that any fall in the number of advisers caused by the retail distribution review will be made up by primary advisers?Yes 25%No 75%No “I don’t think they can replace IFAs. I think primary advice would be a replacement for the old direct salesforce but would not be a replacement […]

1

Goodbye Aifa says Towry, hello Reeve says Pos Sol

The biggest splash in the distribution world this week was the scathing attack on Aifa made by Towry Law’s Andrew Fisher as he announced his firm would be quitting the trade body over its position on the RDR.

The savvy consumer

In last year’s FCA thematic review of the mortgage market, one of the key things highlighted was the “savvy consumer”. That’s the client who comes in the door with a very clear idea of what they need and expect you to get them it. They don’t think they need advice, they have after all consulted […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment