Liquid error: wrong number of arguments (2 for 1) Property Wire: Property industry welcomes Bank of England rates promise boost | Marsh & Parsons Sales and Lettings Estate Agents London

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Property Wire: Property industry welcomes Bank of England rates promise boost

Wed 07 Aug 2013

The unprecedented annoucement by the Bank of England that it intends to keep interest rates at historically low levels for several years has been welcomed by the property industry.

The new govenor of the Bank of England, Mark Carney, has taken a different approach and it was announced that at its most recent meeting the Banks Monetary Policy Committee (MPC) voted to provide some explicit guidance regarding the future of monetary policy.

It intends not to raise Bank Rate from its current level of 0.5% at least until the UKs unemployment rate has fallen to 7% which could be 2015 or 2016. This is the biggest boost that the property market has seen in a long time allowing lenders to lock in and offer attractive rates to those seeking a mortgage, said Paul Smith, chief executive of haart estate agents.

It is all very well creating this economic buoyancy and increased demand but from all sides we are seeing a shortage of property coming onto the market. However, the governors statement gives a stability to the market which is vital for its growth and increased activity, he explained. Significant increases in property prices reported over the last few days ought to spur prospective buyers to put their property on the market at a relatively early stage to benefit from this positive sentiment, he added.

Brian Murphy, head of lending at the Mortgage Advice Bureau (MAB), said that the announcement should prolong the golden age of fixed mortgage rates that we are currently expriencing. The fact he (Carney) is in no hurry to push the button and implement a higher base rate until the economy shows prolonged signs of good health makes variable rates a more secure bet. Lenders are already awash with funds and are sure to be considering how much further they can lower fixed rates to attract business.

With many chasing their yearly lending targets, even better offers will be heading our way, he pointed out. By harking back to pre-crisis levels of application and high loan to value (LTV) lending, Carney clearly expects the mortgage market to continue its recovery and is looking for it to play a big role in the re-emerging economy. The announcement is likely to mean that conditions continue to favour home buyers for the forseeable future, he added.

According to Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), it offers encouragement that under the new Governor's leadership the Bank of England's approach to monetary policy is shifting towards market guidance about the medium and longer term rather than a wait and see approach. We have waited a long time for this weeks headlines celebrating a return to growth.

But as the Governor said, this remains the slowest recovering economic output on record and a premature move to withdraw stimulus measures is in no-ones interests, he commented. As well as providing a degree of clarity on future interest rates, the Banks position also suggests it is expecting activity in the housing market to continue its curernt growth trend.

Low interest rates will certainly encourage further borrowing, and with lenders taking responsibility for stress testing mortgage applications under the new Mortgage Market Review rules, the Banks forward guidance will provide further material evidence on which to base lending decision, explained Williams.

But he pointed out that the construction sector is still very affected by what Carney called exceptionally weak productivity in the wider economy. House building simply has to increase if we want to avoid housing and mortgage markets tipping over under the weight of growing interest applications. The government would do well to follow the Governors lead in taking a longer term vision when it comes to housing policy decision, he added.

Peter Rollings, chief executive of estate agent Marsh & Parsons also thinks it will boost the property market. The London market in particular, is presently underpinned by rising positive sentiment due in part to the governments Funding for Lending scheme and the Help to Buy initiatives as well as strong demand from home and abroad.

Growth in the countrys GDP, reduction in unemployment and a feeling that we are finally out of the economic badlands means the market can now be assured of certainty as far as interest rates are concerned, he said.

This is a highly important statement which will allow lenders to offer attractive fixed rate deals to potential buyers and will surely lead to greater demand and activity in both the resale market and provide a fillip for first time buyers. The Governor is implicity saying interest rates will not rise until 375,000 more people are in work. This will give the market across the UK much welcome stability, he added.

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