Thu 5 Jun 2008
Interest Rates: The Industry Review
The Bank of England took advice from the Organisation for Economic Co-operation and Development (OECD) and kept interest rates on ice at 5%. But will keeping interest rates at the same level until 2009 help or hinder the housing market in the long-term? Show House online asked some industry experts:The builder
Phillip Gill, managing director, Bishop Acklam Developments
“The Bank’s decision to hold rates was widely expected, due to the inflationary pressures facing the economy. It may help to keep inflation in check, but it’s not supportive to UK consumers and homeowners. A quarter point cut would have given hard-hit consumers and homeowners a much-needed boost.”
The land agent
Neil Chegwidden, head of residential research, Jones Lang LaSalle
“I would say that if we see no cut in interest rates until 2009, we risk falling into recession. Households have had to deal with the equivalent of several interest rate rises in recent months in absorbing higher food, fuel and utility bills as well as settling higher mortgage costs. So even if interest rates are cut, we don’t risk a strong rebound in consumer sentiment and spending, as was the case in 2004. All an interest rate cut would do is to provide a little help in staving off a recession.”
The estate agent
Liam Bailey, head of residential research, Knight Frank
“Maintaining rates at 5% is not at all helpful for the UK housing market – year-on-year sales volumes are down by more than 50%, and prices have fallen by 7% since the peak in October last year. The housing market will see prices fall by 5% in 2008, but without lower base rates and a more normalised mortgage market, we could easily see price falls well into double digits.”
The supplier
David Ferguson, managing director, Intelligent Property
“The Bank’s decision to hold firm is a shame for our clients, who include developers such as Barratt, Persimmon and Gladedale. While our clients are still seeing activity from people searching for property on their mobiles and the internet, the lack of confidence in the market means that buyers are not committing. Action is needed to restore confidence.”
The financial provider
Steve Cox, operations director, Spicerhaart Financial Services
“Holding the base rate is a controversial decision. But in the current market, whether a cut would actually make much of a difference is debateable. Nevertheless, it’s certain that something does need to be done to prevent the credit crunch taking a greater hold on the property market. Movement in the base rate alone won’t kick start purchase activity.”
The architect
David Lumb, managing director, Design Group 3 Architects
“No surprises here that rates have been held – although it’s very disappointing. The industry is definitely facing this uncertainty for the long haul until confidence returns to the market. For anyone developing in urban markets or on high-rise developments, the market is very tough, although work on greenfield and brownfield sites is still quite buoyant.”
The first-time buyer
Helen Adams, managing director, FirstRungNow.com
“Today’s announcement means a period of stability, which is good for first-time buyers. Lowish interest rates mean that mortgages are no more expensive than last year. With property prices stabilising too, there’s no rush to get on the property ladder.”
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