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Friday 21st of November 2008
December 20, 2007

Interest rate reductions signal turning point for first-time buyers


by Gill Montia
”Interest

The fact that the Bank of England’s Monetary Policy Committee (MPC) voted unanimously to cut the base rate to 5.5% in December is good news for house buyers.

The move signalled the first fall in the base rate since August 2005 and the fact that all nine members of the MPC were in favour of the cut indicates that analysts’ predictions of further reductions in the New Year are accurate.

Stuart Law, chief executive of Assetz, the property investment specialists, comments: “It is good to see, from this unanimous verdict, the MPC is finally reacting to the very clear and present dangers of the credit crunch, as opposed to the far more vague concerns in relation to inflation.”

Mr Law believes that: “Inflation will end the year pretty much bang-on its 2% target” and expects “further downward movement below target in the spring, allowing interest rate cuts to take place quickly.”

In these circumstances he expects “a turning point for first-time buyers” because while they are “likely to be nervous from recent press comment” there should be opportunities over the next few months to “pick up a bargain from a developer or vendor looking to sell quickly”.

He recommends that buyers move quickly to take advantage of reducing interest rates because “the shortage of property in the UK will not go away for many years or even decades to come, and prices will strengthen again in due course as a result.”

In terms of a base rate forecast, Mr Law expects to see two further decreases by March of next year, taking it down to 5%, after which he believes there is the possibility of further drops later in the year, down to 4.5% or below.

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