Mortgage News 1 Point 5 Percent An All Time Low For Interest Rates But Is It Enough 2735

1.5% an all time low for interest rates, but is it enough?

09 January 2009 / by Rebecca Sargent
Interest rates fell to an all time low of 1.5 per cent yesterday, but experts warn that this alone will not rescue the UK’s falling economy.

In its announcement of the latest cut in interest rates, the Bank of England itself said that more needs to be done to boost the economy:

“The availability of credit to both households and businesses has tightened further, pointing to the need for further measures to increase the flow of lending to the non-financial sector,” it said in a statement.

Lenders are also concerned over the fact that interest rate cuts have so far failed to have the desired effect, director general of the Council of Mortgage Lenders (CML), Michael Coogan said:

“The market is still not functioning properly and is likely to lead to a fragmented approach by lenders, as they try to balance the interests of savers and borrowers and other pressures on their businesses, in responding to today’s announcement.”

Testament to the fact that the mortgage market continues to suffer is yesterday’s announcement by the Bank of Ireland that it will no longer be sourcing new mortgage business through independent brokers in the UK.

The Bank of Ireland’s statement said: “This is in line with the strategy outlined at our Interim Results in November 2008 to reduce dependency on wholesale funding through selective balance sheet de-leveraging and to rigorously manage our cost base.”

It has also emerged today that experts are concerned that mortgage lending may also suffer at the hands of Gordon Brown’s mortgage support scheme, which could reduce repossessions but leave lenders further out of pocket.

John Charcol’s mortgage expert, Ray Boulger also thinks that the Government should be doing more: “Lower interest rates are only part of the solution to our current severe economic problems,” he said.

“An even more pressing issue is to stimulate lending, both for mortgages and to business, and the Brown/Darling duopoly needs to urgently deliver measures to address this problem.”

Referring to the recommendations made in The Crosby Report that the Government should guarantee £100billion of new mortgage backed securities, Mr Boulger added:

“Instead of deferring implementation of these proposals by several months, until the budget, and indeed doing more, the Government needs to act now.”

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Written by Editorial Team