The property industry says the Bank of England’s decision to maintain the official rate at 0.50% was no surprise.
The Monetary Policy Committee today voted to hold rates at their lowest level in the Bank’s 315-year history.
It follows a series of rate reductions in previous months to try to limit the effects of the recession.
James Thomas, head of residential development and investment at Jones Lang LaSalle, said the Bank of England had done all it could in terms of interest rate cuts to support the economy.
“It has turned its attention to unorthodox measures to try to get credit flowing again,” he said.
“Some of the money being injected into the economy should hopefully find its way to mortgages for homeowners in due course.”
Atisreal head of research Keith Steventon said what the European Central Bank does to interest rates is now more important to the UK property market than what the Bank of England does.
“It is the ECB that is moving the exchange rate and determining how attractive UK property is to German investors,” he said.
“The pound was at its lowest against the euro at the end of December and since then the exchange rate has risen 8.5%, wiping out all this year’s fall in capital values.
“With the pfandbrief market revived and German funds and banks looking for UK opportunities, a further cut by the ECB will help the UK property market more than any cut by the Bank of England.”
Knight Frank’s head of residential research Liam Bailey said: “The decision to leave base rates at 0.5% is unsurprising – further cuts would have little effect on the mortgage market.
“It is unclear whether bringing them to such a low level so quickly has produced the desired result.
“There are chinks of light, however. Mortgage approval rates are increasing, albeit from a record low base.
“The nationalised lenders are committed to lending substantial amounts this year, and HSBC’s announcement yesterday of a new 90% mortgage package is a sign that the market may be easing.”
Jones Lang LaSalle head of forecasting and economics Fergus Hicks said: “A clear trend that has emerged in the investment market is the disconnect between prime and secondary properties.
“There are tentative indications that the prime end may be stabilising in the Central London market including the City of London while secondary properties will see further yield shifts.
“It is evident that investors are focusing on prime product given its lower risk profile and relative attractive pricing at the current economic environment.
“The weakness of sterling is causing some investors to see the UK market growing in attractiveness and for the best assets – there is competitive bidding.”
