Commenting it says: “Naturally, borrowers on bank rate tracker mortgages would welcome a cut, but they are already paying low rates by historical standards and the interests of savers have begun to attract a higher profile within the current low interest rate environment. Given that lenders need to attract savers to help fund new mortgage lending, this is an important factor in sustaining and improving the flow of lending.”
Would a rate cut increase confidence and activity in the housing and mortgage markets? While it may help, the CML doubts that lower rates in isolation will reverse the low level of transactions or the downward pressure on house prices, especially at a time when the wider economy is in recession and consumers are anxious about their employment prospects.
“The pros and cons of continuing rate cuts are debatable, but what is certain is that comprehensive measures to support the economy and improve confidence will be essential in the spring Budget. In the meantime, the good news is that borrowers are enjoying low mortgage rates by historical standards: the average rate for a new mortgage in December was 4.48%, compared with an average of 5.1% from 2000-2008, 8.3% in the 1990s and 12.6% in the 1980s.”
