Liam Bailey, head of residential research at Knight Frank
“Today’s interest rate reduction is a positive move from the Bank of England; the market has being anticipating this for some time and there is no doubt that purchasers will be encouraged. In reality the most important aspect of today’s move is that it sends out the correct signal to the market, that interest rates have peaked in the current cycle and there is likely to be another cut in the next few months.”
Mehrdad Yousefi, head of intermediary mortgages at Alliance & Leicester:
Brokers at last have something to cheer about. A reduction in interest rates, against the backdrop of lower retail sales and mortgage lending figures for the first half of this year compared with the same period last year will be a welcome boost to the housing market and will help the wider economy.”
Lee Grandin, managing director of Landlord Mortgages:
“The rate reduction will come as welcome news to landlords as it is likely to herald a rate war between buy-to-let mortgage providers as they swiftly cut rates in their battle to gain customers.
“Looking at the general housing market, I don’t feel that this rate change will see a massive influx of ordinary consumers purchasing houses as they are still facing the problem of needing huge income multiples and finding a substantial deposit. This means that landlords will continue to be able to snap up bargains from sellers looking for a quick sale.
“Obtaining finance for property investment has been gradually getting easier over the past few years as the market becomes more mainstream and today’s change is likely to make it even easier. Great deals like lifetime buy-to-let trackers, which only charge 0.39% above the base rate and require 125% rental cover, are currently available so we are likely to see even better deals now!”
Brian Murphy, lending manager at Mortgage Advice Bureau:
“We believe this overdue interest rate cut should help stimulate the housing market. Although a 0.25 per cent drop will not have a huge impact on mortgage rates, it should restore a little much-needed confidence to purchasers. We hope this cut will provide encouragement to prospective purchasers and inject some upwards movement into the housing market.
“Mortgage rates are currently very attractive as most providers have already factored today’s cut in, and the rate cut may serve to push them down even further as competition between lenders intensifies. As well as helping first-time buyers, these rates will prove attractive to homeowners seeking to remortgage. With such favourable rates available, homeowners may want to take the chance to review their finances and consider remortgaging to a better deal.”
Matthew Wyles, group development director at Portman Building:
"The rate reduction comes as no surprise and is already fully discounted into the pricing of fixed rate mortgages. Customers should not, however, assume that this is the beginning of a landslide in mortgage pricing – the extent and timing of further reductions is by no means clear.”
Jim Buckle, managing director of propertyfinder.com:
“Our surveys show confidence in the housing market has recovered in the last three months as buyers and sellers began to anticipate falling interest rates. The housing market began to recover as a result. Without today’s interest rate cut, the housing market would have quickly sunk back into the doldrums. Further action to reduce rates in the autumn looks fully justified and we urge the MPC to keep rates on a downward path.”
Peter Griffiths, chief executive of Principality Building Society: “We were expecting an interest rate cut this month, particularly after it emerged that just one vote on the MPC prevented a cut last month.
“The slowdown in consumer spending and the impact on the high street is well documented. The cut is unlikely to stimulate additional activity in the mortgage market but it does provide a view of interest rate stability going forward which may encourage more first time buyers into the market.
“We have seen an uplift in savings recently and a clear trend is emerging where consumers are seeking to consolidate their position and repay existing debt rather than spend and/or borrow which had been the norm over the last few years.”
Ray Boulger of John Charcol:
“Today’s cut has been fully discounted by market professionals but about half the population were expecting the next base rate change to be upwards. Therefore, the effect this will have on consumer confidence should be magnified as many, psychologically speaking, have just received a half point cut.
“Two interesting surveys were published recently, one by the Bank of England and the other by Yorkshire Bank, revealing the public’s jitters on interest rates, finding around 50% of respondents thought that the next rate move would be upwards. The small cut today should therefore have a disproportionate effect on confidence and we are likely to see the more astute buyers, especially first-time buyers, who have been holding off until now reassessing that strategy. As a result, today’s cut is likely to stimulate the first shoots of recovery in the housing market and I expect to see a significant change of mood over the next few months. The pendulum will swing from a buyers’ market to equilibrium and then, by next spring, a sellers’ market.
“Additionally, affordability is significantly better than this time last year. Average house prices are down 5%, average earnings are up 4% and average new mortgage rates are down half a per cent. This latter figure is based on fixed rates being 1% lower, variable rates being unchanged and the average take up of new mortgages roughly 50/50 between the two. Whilst recognising that for some people affordability is still a problem, this suggests that many potential buyers who have held off because of market concerns will be in a stronger position than when prices peaked last year.”
Andrew Frankish, managing director at Mortgage Talk:
"The Bank is acting to try and stimulate High Street consumer spending, which has been suffering badly during this year, with the economy growing below trend for four successive quarters - its worst performance in more than a decade."
'"The recent slowdown on the High Street has slashed growth rates, with year-on-year growth in the second quarter of the year standing at just 1.7%.
This is its weakest rate since the first three months of 1993, and
significantly short of Chancellor Gordon Brown's target of 3%-3.5% growth this year," he adds.
"However, a rapid series of cuts over the coming months seems to be unlikely, due to the risk of kick-starting further inflationary pressures.
The rate cut will help further to stimulate demand in the housing market Frankish argued. "Combined with figures from the British Bankers' Association (BBA) and Council of Mortgage Lenders (CML), showing that mortgage lending increased markedly in June, this move by the Bank of England will help fuel demand for well-priced properties."
"Our main concern is that the housing market does not start to overheat again. The base rate move will trigger further confidence, but this must not result in price inflation getting out of hand again,' said Frankish.
"There is still too much estate agency stock on the books and, while buyer confidence will help reduce this, sellers must remain realistic, including lowering their sights on the prices they are currently demanding."
