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Interest rate cut welcomed by property heads

Friday, 8 February 2008 12:00 AM

Yesterday's Bank of England interest rate cut has been cautiously welcomed by the property market - amid calls for further reductions early in the spring.

At its monthly meeting the monetary policy committee (MPC) announced the base rate of interest would be cut by 25 basis points - down from 5.5 per cent to 5.25 per cent.

The move is likely to act as a balm to pressurised mortgage holders, according to some commentators.

"This is great news, particularly following the latest price report from the

Halifax which confirmed prices held steady again in January," said Peter Ford, regional director for Townends estate agents.

"Money is now becoming cheaper to borrow which means buyers who previously could not have afforded to buy, may well be tempted back into the market and those with properties to sell are able to be more flexible which will help with their onward purchase."

Figures from the Council of Mortgage Lenders (CML) show a 0.25 per cent cut in interest rates will see a £23.20 reduction in repayments on a £150,000 25-year variable rate repayment mortgage.

The move was also welcomed by estate agent Knight Frank.

"Today's reduction in the base rate to 5.25 per cent is welcome news for the UK housing market," said Liam Bailey, head of residential research at Knight Frank.

"Despite more positive soundings coming from some recent price surveys the market is under significant pressure at the moment, market activity is down by more than 30 per cent on a year on year basis in terms of mortgage lending and sales volumes and pricing are subdued in almost all markets."

And more cuts appear to be the only solution for Mr Bailey, who continued: "Affordability pressures remain tight and really the only short term fix for the market will be achieved through lower interest rate through 2008."

Mortgage lenders have begun cutting interest rates in response to the MPC move - after coming under fire for failing to do so following previous cuts.

Both Abbey and Woolwich has implemented a full 0.25 cut, with Andy Gray, head of mortgages for the Woolwich, saying: "The base rate cut is a welcome move as the housing market is slowing considerably and mortgage affordability is stretched at the moment."

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