The Bank of England has today cut interest rates by half a percentage point. They now stand at 1.5% – the lowest in the Bank’s 315-year history.
Analysts view today’s cut as necessary to help support the economy through recession. No one is ruling out the possibility now that base rates could fall to zero over the next few months, a first for the UK.
The move has met with approval from members of the property industry. Winkworth welcomed the decision saying: ‘The rate should encourage renewed interest in property as an investment as interest on savings fall.’ Managing Director Dominic Agace added: ‘I don’t foresee an immediate reaction, but it represents some positive news for the property market.’
Philip Selway of The Buying Solution, a buying agency, echoes the feeling that savers are going to be encouraged to put their money into bricks and mortar, rather than watching it waste away in savings accounts. If property prices are reduced by 20% to 25% from their peak, he has clients who are ‘keen to do business early’.
James Thomas of Jones Lang LaSalle believes that while banks remain cautious about lending, property owners aren’t going to feel immediate relief from this base rate cut. ‘Furthermore, rising unemployment and uncertainty about job security will see potential buyers very reluctant to commit to any purchases.
‘The only sign of respite for the housing market is that the large interest rate cuts made last year are feeding through to the LIBOR rate. The 3-month LIBOR rate was 2.65% at the start of 2009, down from a peak of 6.30% at the start of last October. Lenders’ standard variable rates are falling as a result, which will ease the pain somewhat for borrowers coming to the end of fixed-rate deals and unable to remortgage.’