Rate cut 'not enough to spur house buying'

The Bank of England has cut basic interest rates by a quarter of a per cent, but the slash may not be enough for markets or for first time homebuyers, it has been claimed.

The Times claimed that markets were resoundingly in favour of a bigger cuts, as the 0.25 per cent drop brought rates down to 5.5 per cent, in a move intended to ease lending – especially in the stricken mortgage area.

One trader told the times that the quarter point rate cut was not enough to give home-seekers and others the confidence to buy, explaining: "This is just not enough to stop a consumer downturn. I've been telling clients to sell banks and property stocks all afternoon."

A key motivation behind the cut is said to have been the looming possibility of a property crash next year, with many fearing that recent monthly price drops could lead to a further tailing off.

London has been tipped by many to avoid the worst of any price crash – with such a high premium on space in the crowded capital – but despite recent drops in price and this week's rate cut, buying in London is still an impossibility for many first timers with limited budgets.

Especially for those looking in well connected central locations, rental property becomes a better option, with the Bank of England's move likely to help make some mortgages more affordable, but leave many others anticipating a bigger cut before buying.

Published 7th December, 2007

© 2007 Estates IT Limited