Agents say rate cut will make it harder for lenders

Yesterdays’s rate cut to 0.5% has failed to excite estate agents, who say that the latest reduction cheapens Britain to foreigners, whilst acting as a deterrent to savers and making it harder for lenders to lend.

Jennet Siebrits, head of residential research at CB Richard Ellis, said: “The housing market is not being helped by constant base rate cuts. Ultimately, there is a danger that people could enter the market when interest rates are low and get into difficulty when they start to rise again, taking their mortgage repayments with them.

“Furthermore, this latest cut will only add to pressure on the savings rate, making it even harder for financial institutions to lend.”

John Phillips, financial services director at Kinleigh Folkard & Hayward, agreed: “Savers will now be less inclined than ever to put money into savings accounts. This will hit banks’ profits and make them less likely to lend further.”

James Hyman, partner for residential sales at Cluttons, commented: “As the majority of property transactions are now cash-led, it’s hard to see who will benefit from this rate cut apart from borrowers on variable or tracker rates. With bad news continuing on the stock markets, property investment looks far more appealing – but only for those with cash in the bank.

“For those seeking a mortgage, it has once again become exceedingly hard to take advantage of the affordable opportunities in the market, with good deals limited to a very small number of people.

“The banks need to lend on more favourable terms with higher LTVs and lower interest rates and take more risk with their customers to bring the volume of transactions back to the market.”

David Adams, head of residential at Chesterton Humberts, said: “This cut will have no further positive effect other than to reduce the value of the UK pound and make UK property even more affordable for European and North American buyers.
 
“Chesterton Humberts has seen a surge of offshore buyers in recent months, but the key to a full recovery in the property market is increasing the availability of financing. Mortgage lending remains at an historic low, with banks avoiding lending by down-valuing properties when buyers apply for finance.

“The other economic issue hindering recovery is the extortionate level of Stamp Duty charged.  It is not reasonable or fair to ask buyers with young families to find an additional £40,000 in tax to upgrade to a Fulham town house, for example.

“Now that interest rates are at an historic low, the Government and banks must increase lending and reduce the cost of buying.

“We are seeing strong demand for property, with viewings and offers up substantially from last year, but this will not translate into sales until the lending and tax issues are resolved.”