Michael Coogan, director general of the Council of Mortgage Lenders, says: “This is good news for those borrowers with mortgages tracking the bank base rate.
“But in these dysfunctional market conditions, the base rate is not in itself a good guide to the cost or availability of funds to lenders.
“To improve the market in which lenders are operating and restore consumer confidence, the bank needs to coordinate successive base rate cuts with further injections of more widely available liquidity.”
He adds: “We would like to see another base rate cut next month partnered with more liquidity auctions, of higher amounts, over longer terms, and available to a wider range of institutions. This coordinated approach would help to show the authorities are serious about tackling the market problems.”
Adrian Coles, director-general of the Building Societies Association, says: “Today’s rate cut shows that the Monetary Policy Committee recognises the potential risks to economic growth and the housing market. With activity in the housing market cooling, this rate cut should make it easier for borrowers to meet their mortgage costs.
“The cut will be particularly welcomed by those taking out a new mortgage and those coming off a fixed rate product. However, the MPC’s rate decision may not be reflected by changes to the money market rates.
“Therefore the quarter point reduction will not necessarily be reflected in the fixed rates on offer straight away.”
Stuart Law, chief executive of Assetz, says: “Finally the Bank of England has taken action and sanctioned a much needed cut in interest rates. However, I fear this is not enough and very late – with a more significant cut of 0.5% needed if it was to have any impact on the market.
“A growing number of lenders are now pricing themselves out of the market with uncompetitive deals and this is not healthy. The BoE not only needed to cut rates today but it needs to inject some much needed liquidity into the market, before competitive mortgage deals all but dry up.”
Brian Murphy, head of lending at Mortgage Advice Bureau, says: “It is a necessary response to current economic growth concerns in the UK and has been widely anticipated by forecasters who are strongly aware of the sense of nervousness throughout the business community.”
Tim Fletcher, sales and marketing director of Baseline Capital, says: “Today’s decision is irrelevant as far as pricing for mortgage borrowers is concerned. The BoE has effectively lost control of retail interest rates which have become decoupled from the base rate set by the MPC.
“Any change in the base rate now is likely to have little or no impact on the cost of raising funds for lenders. Together with the need to control demand, this cost will continue to dominate retail lenders’ pricing decisions.”