Mortgage lenders have welcomed the Monetary Policy Committee’s decision to leave base rates unchanged wirth many considering the CML’s unprecedented call on 24 June for “modest increases in interest rates” ill-advised.
There was a rumour circulating the industry that CML director-general Michael Coogan had just consulted the Halifax before making public his view that an increase in rates was necessary because house price increases in the range of 20 percent were unsustainable.
However, the CML has since confirmed that it made the decision to call for an increase in rates without consulting its members. In addition, while being reluctant to be drawn on the subject, Halifax spokesman Mark Hemingway agreed that the bank had been a little surprised by the CML’s attempt to influence base rates. He said the Halifax did not see its role as recommending what the MPC should do as it has a broad national remit and had to take the whole economy into account.
“The MPC’s decision to leave things unchanged is what we expected given the uncertainties in the world and UK economies, though we expect to see an increase in rates over time to temper consumer demand”. he said.
Chris Cummings, marketing director of specialist lender Sun Bank, also welcomed the MPC’s decision to hold interest rates for the eight consecutive month. He said: “The Bank of England’s brief as far as rates are concerned is to keep inflation below 2.5 per cent and should have nothing to do with the stability of the housing market.”
“Small rate increases will have little effect on the housing market. This is because the market is driven by supply and demand and depends upon general consumer confidence. At present, demand is exceeding supply and confidence would only be dampened if there is a considerable rate increase - but that would have a detrimental affect on the whole economy, particularly when the stock market is currently suffering.
"I agree that we should be keeping the market stable and prevent it from overheating, as no-one wants a repeat of the boom and bust days of the late 80s and early 90s. I am a strong believer that market forces will prevail and that we will see a natural slowdown in the market soon.”
Eddie Smith, director of business development at Verso, said:
"All the indicators show that the housing market is more than stable and rates reflect this. Artificially interfering with rates upwards could lead to further rate increases much quicker than is needed and that would put the housing market into a possible recession. Why risk it?
"My view would be wait and see. Autumn would be my prediction for any changes in rates and then, via the MPC’s own decision."
