The call was issued as AMI released its latest Quarterly Economic Bulletin that sets out its view of the economy, as well as the mortgage and housing markets. The report contains a wealth of key UK economic data and provides an overview of current market trends.
Chris Cummings, Director General, AMI, said: "AMI's latest bulletin shows the continuing and urgent need for a public policy response to a turbulent housing market. While there has been significant activity to maintain our banking system, the actions have yet to work their way into the mortgage market. As a start, we urge the Bank of England to cut interest rates by 1%.
"We continue to meet with the Treasury, Bank of England, Financial Services Authority and Sir James Crosby to set out our case for decisive action. We have also spoken to all of the political parties, as we believe that political impetus needs to be brought to bear if we are to stop this economic crisis doing permanent damage to the home-owning public and to our mortgage industry."
Key highlights of the latest Economic Bulletin include:
Mortgage Market
* Lenders continue to increase margins and tighten terms on which they lend
* Mortgage approvals for house purchase fall to lowest level on record
* Re-mortgaging, previously resilient, has fallen, but should now begin to improve
* Rental markets continue to show strength
Inflation
* Oil and food prices send inflation soaring to 5.2%, the highest level since the Bank of England took control of monetary policy in 1997
* However, commodity prices now in decline should allow the MPC to cut rates to mitigate the depths of the recession
• Unemployment to increase significantly reducing medium term inflationary pressure
Money market
* Disconnect between interbank (LIBOR) markets and base rates continues to cause concern
* Government intervention to support banking industry will take time to feed through to money markets
• Base rate cuts not feeding through to mortgage rates
