Rate cut 'will do little to stimulate housing market'

Posted: 07 Jan 2009 13:09:22 GMT

A further cut in interest rates by the Bank of England's monetary policy committee (MPC) later this week might grab the headlines, but it will do little to revitalise the property market, it has been claimed.

According to the Association of Mortgage Intermediaries (AMI), the property market's failings do not stem from the current interest rate level of two per cent but from a lack of liquidity.

As a result, AMI director Robert Sinclair believes any interest rate cut is unlikely to have a noticeable effect on house prices, mortgage figures or the time it takes to sell a property.

A better course of action, Mr Sinclair suggests, would be to address the failings uncovered by the Crosby Review of mortgage finance.

The government "must do so as a matter of urgency and ensure that sufficient funds are available for lenders", he commented.

"AMI will continue to call for these changes while encouraging the MPC to pressure for other changes to reduce the risks of deflation and recession."

The MPC is due to announce its latest interest rate decision on January 8th.

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