Base Rate remains at 0.5% and some positive developments emerge - 10.08.2009

Author: Michael Aglony Posted on: 10 August 2009

As expected, the Bank of England announced on Thursday that Base Rate will stay at 0.5%. As mentioned last month, with most economists predicting a slow recovery from the current recession and with unemployment set to continue to rise next year, we believe that Base Rate will remain at this level well into next year and possibly beyond!

Despite the low Base Rate, liquidity in the money markets remains an issue. Somewhat surprising to some (not to those who read our Quantitative Easing updates!) the Bank of England announced an in increase in Quantitative Easing to £175Bn i.e. an extra £50Bn rather than the £25Bn expected. This reflects their concerns over liquidity and negligible inflation figures. Lenders continue to pay a premium over published LIBOR rate & SWAP rates for their funds and remain cautious in their lending decisions. They are lending though and we are starting to see some encouraging signs.

Traditionally, after the summer break, the mortgage and housing market kick starts in September and whilst we are not expecting miracles, there will be more activity and improving mortgage options. We have already seen a few lenders coming to market and some of the overseas Banks are now looking to help with the obvious pent-up demand for good quality Commercial mortgage, Residential mortgage and Buy to Let mortgage business. We welcome the approach being taken by the likes of Handelsbanken, Bank of China, and new kid on the block, Aldermore Bank and we are confident that other lenders will look to improve criteria over the coming weeks. Political pressure and the Quantitative Easing programme will also help over the next few weeks and months.

Mortgages for Business has access to all the active lenders so please call if you need a mortgage! Keep an eye out for our product alerts, blogs and e-mails keeping you up-to-date on activity in the mortgage market.

Author: Michael Aglony