Following Augusts Base Rate cut to 4.5 per cent, the Bank or England have taken the expected step to keep the Base rate static.
Duncan Pownall, mortgage development manager for Bradford & Bingley said: "After a unanimous vote to hold last month, it was widely expected that the MPC would again keep base rate unchanged at 4.5 per cent, despite repeated calls for a cut from the manufacturing and retail sectors. The slowdown in the economy is not as marked as some may suggest and while it is true that the economy has grown below its trend rate, the divergence has only been modest.
“There is still a wide range of opinion on the prospects for interest rates but we believe it is likely that base rate will remain on hold for the rest of the year unless there is very firm evidence of further weakening in the economy.”
Mike Pendergast, independent financial advisor at Zen Financial Services similarly agreed that with the decision to keep the base rate the same: “There is no real need for the Bank of England to make any amendments at present as the housing market is still ticking along and there are no other major economic factors which require either a rise or cut in interest rates.”
However David Bexon, Managing Director of SmartNewHomes.com argued that the decision not to lower rates could damage the UK housing economy: “The Bank of England’s interest rate decision this month was predictable but not necessarily right. The Committee members have made it clear that they are in no hurry to cut rates again, despite the widespread effects of the global oil crisis and the continuing downturn in consumer spending. The housing market is currently delicately poised and at risk of stalling further if we do not see the much-needed rate cut by the end of the year.”
Mehrdad Yousefi, Head of Intermediary Mortgages at Alliance & Leicester: "The MPC's decision today to maintain rates was widely expected. Recent economic data has highlighted a lower economic growth rate than forecast in the March Budget, partly due to higher oil prices and lower consumer confidence.
"The market is still noticing the positive effects of the Base Rate cut in August with a great deal of activity in the housing and mortgage markets, resulting in higher volumes of mortgage approvals in the past two months.
"Fixed rates are still very competitive, however there has been an upward movement in swap rates which means lenders buying new funds are likely to have to increase their fixed rate deals and we have already seen evidence of this.
"The choice between variable rate deals and fixed rate deals is still very much dependent on the individual circumstances of each borrower. Those on tight budgets will appreciate the security that fixed rates offer, whilst others will prefer the flexible structure of variable rates. Alliance & Leicester continues to see a high demand for fixed rate products."
