Property agents are calling on the Bank of England to cut interest rates after the latest inflation figures showed a drop.
Inflation fell to its lowest level in more than two years this morning at 3.4%, increasing the pressure on the Bank’s Monetary Policy Committee to cut the base rate.
The Bank held the base interest rate at 5.25% for the fourth time running last month, and warned that a cut wasn’t imminent.
Result
It is due to announce the result of its latest meeting tomorrow, with speculation that it will hold the rate again at 5.25%.
Mortgages are creeping upwards, increasing the amount homeowners have to pay if they come off a fixed rate.
Ideal time
Propertymark says now is the ‘ideal time’ to make a cut to give the housing market a boost.
This is an ideal time for the Bank of England to start considering a cut in interest rates.”
Nathan Emerson, CEO of Propertymark (main picture), says: “This is an ideal time for the Bank of England to start considering a cut in interest rates when they meet this month.
“Andrew Bailey, the Governor of the Bank of England, said recently that inflation does not have to fall to 2 per cent before the central bank starts considering cutting interest rate,” he says.
“Propertymark’s own Housing Insight Report shows that there has been an average 120 per cent increase in the number of potential buyers registered per member branch, and this is potentially an ideal time to revitalise the housing market.”
Boost
Simon Gammon, Knight Frank
Simon Gammon, managing partner at Knight Frank Finance, says: “Today’s figures will provide a nice boost to sentiment in the housing market. The decision by many lenders to notch up mortgage rates recently took people by surprise, but today’s figures should steady the ship. The drop in inflation may even pave the way for a spate of cuts to mortgage rates during the coming fortnight.
“That said, these cuts will be pretty marginal. We don’t expect mortgage rates to begin falling more meaningfully unless we see an outsized drop in the annual rate of inflation during the next two releases, or until the Bank of England begins cutting the base rate. The lenders have cut their margins thin in an attempt to maintain market share, so they’re largely out of options until their cost of funds begins to fall.”
Propertymark chief Nathan Emerson has called on the Government to help more first time buyers get on the property ladder as affordability continues to be squeezed in many parts of the UK.
Speaking during an interview with Phil Spencer on the TV presenter’s MoveIQ platform, Emerson said many first time buyers need support to scrape together a deposit and that help from the Government would be key.
His comments follow recent rumours that the Chancellor has scrapped his much-debated 99% mortgage initiative for first time buyers, and Emerson no doubt had an eye on today’s budget announcement.
Spencer asked Emerson whether the UK needed an ‘affordability reset’ – a property crash in other words – a question the Propertymark boss swerved.
Instead, he said that ‘resets’ were down to supply and demand, but that as those two drivers continue to be out of kilter, Emerson said ‘creative ideas’ were needed.
“If you look at people in rented accommodation at the moment they are often paying more than they would if they had a mortgage, so we know they are managing to pay that money,” he said.
risky
Saying that the UK shouldn’t’ return to risky lending, he did nevertheless point out that ‘more structured’ mortgage products to lend to those with decent finances but who haven’t scraped together a 15% or 20% deposit is the way forward.
Unless the Chancellor announces new initiatives, or the return of Help to Buy, then Spencer and Emerson agreed that the market would have to provide them.
A handful already exist including services that enable renters to make rental payments count towards their credit rating; mortgages that allow parent to co-invest in a property; and products that ape Help to Buy by enabling tenants to part-buy, part-rent their homes.
Watch the full interview