Bank slashes rates by 0.5%

Posted: 06 Mar 2009 08:17:05 GMT

The Bank of England has once again brought base rates down to a historic low by slashing 50 basis points off the existing rate yesterday (March 5th).

The Bank of England's Monetary Policy Committee took the bold step to reduce the base rate from a previous low in order to encourage a greater amount of spending, although the effects it is likely to have on the property market have been debated.

With mortgage liquidity issues still dominating the mortgage market, the lower interest rates will offer tracker mortgage customers a better deal on their monthly repayments but will do little to ensure more first-time buyers are able to reach the market.

High deposit demands from mortgage lenders mean that the best way a first-time buyer can reach the property ladder is if they find cheaper property.

Buying a home online could offer cheaper property deals, as buying online could cut out expensive estate agents, allowing buyers to contribute more of their savings to a deposit.

Simon Rubinsohn, chief economist at the Royal Institute for Chartered Surveyors, argued that the Bank's decision will be effective, but only in the long-term.

"The decision by the Bank to both lower the base rate... is good news in the face of the relentless stream of poor economic numbers.

"House prices look likely to fall further in the near term even though there are some signs that transaction levels may now be bottoming out."



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