Simon Jones, director at Savills Private Finance (SPF)
“[The] announcement strengthens our view that the chance of any further Base Rate rise by the end of 2004 is 50:50. Because we feel that we are nearing the top of the current interest rate cycle, we expect to see two-year fixed rates falling to around the 4.5 per cent mark. In the meantime trackers and discounted products remain good value.’’
Peter Gladdy, director of Mortgages Direct
“As far as the housing market is concerned there is no need for any further rate rises this year. Data from across our network has shown that average house prices are currently 5 per cent down from their absolute peak. While prices should remain at this level in many regions, they may drop by a further 5 to 6 per cent in some areas. This stabilisation of the market has been the direct result of the five interest rate rises we have had since last November.
Peter Bolton King, chief executive of the National Association of Estate Agents (NAEA)
“The Bank of England made the right decision with the announcement. The five increases in the last year have had the required effect and slowed a previously racy housing market. We will not be surprised to see a further quarter point rise before the end of the year although we must warn the Bank that further rises are not needed by the housing market, let alone the dismal manufacturing sector, and will do it no favours.”
Matthew Wyles, group development director at the Portman Building Society
“Despite the mixed messages from the Halifax and Nationwide house price indices, our analysis clearly shows that battalions of buyers are already deserting the market. The Bank of England has an excellent track record in anticipating trends and we doubt very much that interest rates have anywhere to go but down from here. A further increase would risk turning an orderly retreat into a rout.”
Ray Boulger, senior technical manager at Charcol
“The announcement was entirely expected and it remains a close call as to whether Base Rate has yet peaked. However, even if it hasn’t it is unlikely to increase by more than a further 0.25 per cent. Recent house price indices have shown such a rapid slowdown that, although the MPC wanted to cool the market they have probably been taken by surprise by the speed at which this has happened.
“Last week’s house price index from Halifax does not change that position, despite stronger figures this month. One month’s figures should never be viewed in isolation and their last two months’ figures produce an average increase in prices of just 0.4 per cent per month, not significantly stronger than other indices. Most other economic statistics over the last month also suggest the economy is faltering and the effects of this year’s rate rises have not yet fully trickled through.”
Jane Dawson, head of press and PR at Moneyfacts
“The housing market was slow to respond to early rate increases, consumers continued to spend and economists predicted another rise before the end of the year – probably in November. This seemed to have been accepted as a done-deal but it’s uncertain now if the housing market could take it. One more rate rise could just be one too many.”
David Bitner, head of product operations for Bradford & Bingley
“With the recent stream of economic data released to the market there was never a doubt that the Bank of England would keep Base Rate at 4.75 per cent this month. Mixed housing index numbers still point to a slowing mortgage market and there is real evidence that the Bank’s strategy for cooling the economy is working. As to whether or not Base Rate has reached its peak – a theory being propagated by many economists – we will have to wait and see but the money market rates suggest this could be a real possibility.”
Trevor Williams, chief economist at Lloyds TSB Financial Markets
“The weakness of economic data in the last month has played a major part in today’s decision. There has been a fall in manufacturing output, the service sector is performing worse than a few months ago and this, coupled with weak inflation figures and signs that the housing market is increasingly coming off the boil, led to the announcement that interest rates are to be left unchanged. What is not yet clear is whether the slowdown in the economy will be sufficient for the MPC to conclude that they have finished tightening policy in the current environment or whether another rise is possible.”
