photo credit: king_david_uk
The UK real estate market has been given another boost after interest rates were slashed for the second time in two months.
Officials at the Bank of England slashed the rate by one percentage point to two per cent – its lowest level for over half a century.
If passed on by banks, the reduction could see property investment loans become more affordable and could also help new homes sales.
Before today’s announcement some commentators had called for the rate to go down even lower than two per cent – which would have been the lowest ever announced by the Bank.
The Council of Mortgage Lenders (CML) welcomed the move, saying:
“This will help the wider economy, even if it cannot be reflected universally in lower mortgage rates. Where lenders feel they can reduce mortgage rates, they will. But their own cost of funds varies.”
Last month the Bank announced a shock initial reduction of 1.5 per cent, which was passed on to lenders by many of the main high street banks.
A November survey by the website Fool.co.uk showed on average UK consumers expected interest rates to fall to 2.85 per cent at least.
The CML’s director general, Michael Coogan, added:
“Lenders want to help their borrowers, both those who are in difficulty and those who are not. This will help to support the wider economy, and ultimately strengthen their businesses too.”
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This all sounds great but it’s not going to boost peoples confidence in the UK property market just yet. It’s also bad news for savers who get low interest on their savings. These low rates will cost everyone in the future as it’s devaluing the pound.