NAEA calls for interest rate cut

Wednesday, 5 March 2008 12:00 AM

The National Association of Estate Agents (NAEA) is calling for a cut in interest rates to boost confidence in the UK housing market.

Prices have begun to moderate in recent months, and now the organisation - which represents 11,000 estate agents in the UK - is calling for the Bank of England monetary policy committee (MPC) to cut rates this week.

The MPC made 0.25 per cent reductions in December and February - with the base rate of interest now standing at 5.25 per cent.

However, more needs to be done, according to NAEA chief executive Peter Bolton King.

"There is an ongoing lack of confidence in the housing market and the Bank of England needs to act fast to stop it stalling," said Mr King.

"We are seeing people squeezed as a result of the credit crunch, as the banks expect bigger deposits and better credit ratings. In addition, nervous banks are keeping their interest rates well above the base rate."

"This means consumers, especially the vital first-time buyers, are caught in a double trap of having to find a bigger deposit and fund higher payments against the backdrop of rising inflation."

Evidence from Abbey Mortgages shows fist-time buyers are already delaying purchases - and a cut in rates may ease the situation for this group.

"The situation is by no means dire but the result could be very different if the Bank of England does not act now," concluded Mr King.

However, a rate cut seems unlikely with a poll of economists carried out by aboutproperty's sister site myfinances.co.uk finding 100 per cent think the MPC will not be bold but will hold interest rates.

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