UK housing market hit by Bank of England

The Bank of England ignored the demands of property developers and estate agents and held UK interest rates at five per cent on Thursday. Economists and bankers had widely predicted the Monetary Policy Committee would hold the rate firm in an effort to control inflation.

In April the rate was reduced by 0.25 percentage points to five per cent, and some had hoped for a further cut for June. Liam Bailey of property consultants Knight Frank said:

“Maintaining rates at five per cent is not at all helpful for the UK housing market.

“The market remains under very significant pressure at the moment, year on year sales volumes are down by more than fifty per cent and prices have fallen by seven per cent since the peak in October last year.

“The difficulties experienced by mortgage borrowers accessing finance are likely to continue putting further pressure on prices and volumes.”

He added lower base rates were needed to stave off the chances of house prices falls heading for double figures. Earlier this week the Home Builders Federation called for a rate cut, warning the UK was on the cusp of a serious economic downturn.

On Thursday Halifax reported house prices again fell in May, this time by 2.4 per cent.

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