Pundits call for rate to be slashed even further

The Bank of England needs to go one step further and slash rates to 1% to get the housing and mortgage markets back on track, argues mform.co.uk.

The online mortgage company says today’s decision from the BoE to cut base rate to 2% is just a temporary staging post on the way to a record low base rate of 1% in 2009.

Eamonn Rice, chief executive of mform.co.uk, says: “The BoE has accepted the case for a dramatic step change in interest rates and now has to go the extra mile.

“More needs to be done to stimulate the housing and mortgage market and the evidence so far is that last month’s record rate cut has had little effect on consumer confidence or the volume of transactions.”

He adds: “Today’s reduction is welcome but is only really acceptable as a temporary staging post on the way to a base rate of 1%.”

But the Council of Mortgage Lenders says the market recovery is a lot more complicated in practice.

Michael Coogan, director-general of the CML. says: “Today’s rate cut will help to support the wider economy, but the practicalities are complex.

“Lenders are simultaneously trying to build up greater levels of capital and liquidity, reduce repossessions, keep rates low for borrowers and for savers.”

He adds: “As we have said before, not all lenders are the same. It is not realistic to expect them all to react in the same way to the rate cut – although where they believe they can cut mortgage rates, they will.

“To achieve its objectives to support the housing market, the government needs to engage with all lenders, not just the very largest, and we look forward to helping with this.”