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Rate cut to soften landing for buyers in 2008

Thursday, 20 December 2007 12:00 AM

The Bank of England's decision to cut interest rates will provide a welcome respite to UK homeowners, according to investment specialists Assetz.

Rates were cut by 0.25 per cent earlier this month, down to 5.5 per cent, in the first fall since August 2005.

Yesterday it was confirmed by the Bank's monetary policy committee (MPC) the cut was a unanimous decision, with all nine members of the committee voting for a cut.

The decision will come as a relief to property owners according to Assetz.

"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," said Assetz chief executive, Stuart Law.

"Inflation will end the year pretty much bang-on its two per cent target and I would expect further downward movement below target in the spring, allowing interest rate cuts to take place quickly."

Indeed, the change in the direction of the market could finally prove to be a turning point for first-time buyers.

"First-time buyers, while likely to be nervous from recent press comment, have a golden opportunity over the next few months to pick up a bargain from a developer or vendor looking to sell quickly," continued Mr Law.

"I would recommend buyers move quickly to take advantage of reducing interest rates over coming months while getting a great property price.

"The massive 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."

Further cuts are also expected next year, which could ease pressure on borrowers further.

"Following the latest, unanimous voting news from the MPC, I am confident we will see another two decreases in base rates by March next year, down to five per cent.

"In fact, we could indeed see further drops later in the year with rates dropping to as little as four or 4.5 per cent," concluded Mr Law.

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