Ray Boulger of Charcol, the UK's leading independent mortgage broker, comments on today's decision by the Monetary Policy Committee (MPC) to freeze Base Rate at 4.75%: "The MPC will not have seen anything during the last month to persuade them to move Base Rate and it's highly likely the same will apply next month.
"Although Ikea store openings still stimulate plenty of activity the general trend of retail sales continue to be relatively soft, with consumers increasingly seeking out the most competitive prices. Anecdotal evidence from estate agents in the last few weeks suggests a modest degree of confidence returning to the housing market. Some early housing bears, such as Cambridge Econometrics, have already moderated their expectations but
quite a few economists are still forecasting a 20% - 40% fall in house prices over the next two or three years, with the house price to earnings ratio being a key factor influencing their expectations. Such forecasts look increasingly wide of the mark.
"Figures released by the Land Registry this week show a 2.7% fall in prices on a national basis in the last quarter of 2004 compared with the previous quarter. The next set of quarterly figures will reflect transactions agreed up to about now and, despite the surprising robustness of the Halifax and
Nationwide indices, I expect them to show a further modest fall. However I believe subsequent quarters of this year will reverse that trend. Any recovery in the housing market is still fairly fragile, another reason for the Bank of England to keep rates on hold until the economic trends become clearer."
What should borrowers do now?
Boulger continues: "For homeowners looking for security in their mortgage payments, there are some good fixed and capped rate deals on offer, such as Newcastle's Mix'n'Match 4.8% 5 year fixed rate. However, borrowers who are prepared to take a modest
risk should look at a tracker or discounted rate."
