Musing of a London Property Finder

The Bank of England reduced the official base rate by a further 50 points today taking interest rates to a record low of 0.5%.  Citing projections that Consumer Price Index or CPI Inflation will fall below 2% in the second half of the year, the Monetary Policy Committee also announced a £75 billion programme of asset purchases as an additional measure to ease deflationary pressure. 

The news has been met with joy by borrowers but has been widely criticised by many concerned that the rate cut undermines savers income and exchange rates.  For those in stable employment, there has never been a better time to be a debtor, particularly for mortgagees on variable rate mortgages with no minimum interest rate. Many borrowers are saving in excess of £2,500 a year for each £100,000 of outstanding motgage borrowing.

Fortunately for property search agents like us, interest rate cuts are good news.  Now is a great time to buy as long as you get a reasonable discount off an accurate valuation.  So you see, every cloud has a silver lining.  Instead of investing in boring old gilts – maybe now is the time to think property instead?

London Property Search Agents, Brighton Property Search Agents, offer a nationwide Property Search on application

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Tags: Bank of England Base Rate, Brighton Property Search Agents, Intrest Rates, London Property Search Agents, Monetary Policy Committee, property search agents

Musings of a London Property Finder

The Bank of England has cut interest rates by 1.5 percentage points to 3%.  Such a sharp reduction is practically unprecedented but members of the Bank of England’s Monetary Policy Committee have hinted on several occasions that a severe reduction in interest rates was likely.  Some pundits have suggested that interest rates could fall to close to 0% by the end of 2009 in order to ease credit restrictions.

Those with tracker rate mortgages should see the benefits quickly and the government will continue to put pressure on lenders to pass on the cuts to consumers on other rates.  Generally central banks refrain from lowering interest rates significantly because it tends to push up inflation as people can afford more, credit becomes less expensive and there is less incentive to save.

Consumer Price Index (CPI) Inflation rose to 5.2% in September, rising sharply from 2.2% since the beginning of the year.  The rapid increase in inflation this year has largely been attributed to rising energy and food prices, however commodity prices have started to fall and oil prices are down by over 50% from their peak so inflation is expected to fall back sharply, as retail energy and food prices decline.

Given the difficult economic situation at present, a reduction in interest rates is expected to alleviate pressure on the consumer purse, but not to the extent of adding to inflation.  The rate was decreased to assist the Bank of England achieve the CPI inflation target of 2%, set by the government in the medium term.

The government is keen to reinvigorate the housing market as quickly and painlessly as possible.  Hopefully this move today will persuade investors and first time buyers to enter the market and get things moving again as yields increase and the margin between the cost of rent and a mortgage narrows.  Keep reading the musings of a London Property Finder to keep abreast of mortgage news

Technorati Tags: Bank of England, Current Interest Rates, Inflation, Inflation expectations, Interest Rates, Interest Rates Fall, London Property Finder, Monetary Policy Committee

Tags: Bank of England, Current Interest Rates, Inflation, Inflation expectations, Interest Rates, Interest Rates Fall, London Property Finder, Monetary Policy Committee