Fri, 07 Sep 07
The Bank of England has voted to keep the interest rate at 5.75%...
Rates have not risen since July, but that was the fifth rise in 12 months. Inflation currently stands at 1.9%, which is below the target of 2.0%.
This latest news will come as a welcome relief to NAEA members and home owners alike. A recent survey of NAEA estate agents revealed that the recent interest rate rises have had a significant negative effect on regional housing markets and individuals are clearly feeling the strain on their pockets.
Results from the survey revealed that an astonishing 71% of agents reported that the interest rate rises have had a negative effect on the housing market in their area. It was also revealed that 61% agents had experienced a sharp drop in the number of house hunters on their books following the August rise.
‘Wait and see’ strategy
Stewart Lilly, President at the NAEA, commented: We are very relieved at the Bank of England’s decision to maintain interest rates at their current level. There have been various economic factors, including fluctuations in the stock market, indicating that now is not the right time for an increase.
It will be beneficial to have this period of stability to help the market adjust to the changes that are taking place at present, not least the controversial introduction of home information packs (HIPs). We are pleased that a ‘wait and see’ strategy has been adopted by the Monetary Policy Committee for the time being allowing consumers and the market a time to adjust and take stock.
We urge the Bank of England to continue to hold interest rates for the foreseeable future.
MPC must lower rates
Robert Bryant-Pearson, Chief Executive of Allied Surveyors, observed: The previous five interest rate rises have clearly impacted on the housing market and will also hit general retail sales, effecting GDP growth and certainly keeping inflation in check.
I am pleased that the MPC has recognised this and taken the responsible decision to maintain rates, which will now give existing borrowers a chance to adjust to higher mortgage repayments especially since many households have yet to experience higher repayments whilst sheltered under fixed rate schemes.
Irrespective of a 'nil rise', households may not have seen the end of rate rises: some lenders, particularly those active in the sub-prime markets, may have to further increase charges to their customers. Hopefully, the MPC will be prepared to lower rates later this year: if they don't retailers could have a poor Christmas.
Stuart Law, Chief Executive of Assetz, says: Today’s decision to hold interest rates at 5.75% was the only option available to the Bank of England, following their earlier debacle, as inflation fell at its fastest rate in five years, with the Consumer Price Index down at 1.9% in July.
Rates are now pretty much certain to stay at 5.75% for the remainder of the year, before a possible fall in early 2008. All suggestions of another rise to take rates up to 6% by the end of the year have now been pretty much quashed.
This renewed stabilisation in rates will come as a welcome relief to homeowners across the country who have felt the squeeze of the five rate rises in the last twelve months.
David Bexon, Managing Director of SmartNewHomes.com, commented: I am pleased to see that interest rates have been held at 5.75%. However, this comes as no surprise considering that there is already evidence of a slowdown in the market and recent reports of an increase in repossessions.
A growing number of first-time buyers are looking to get onto the ladder and have been unable to keep up with the UK’s fast growing house prices.
I would now like to see a freeze in interest rates, if not a fall to allow the market to stabilise and to reduce mortgage repayments for already struggling homeowners.
The increase in the number of repossessions currently taking place in the market should act as a stark warning that all is not well, with a growing number of homeowners simply unable to cope with the series of earlier interest rates rises this year.
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