Mortgage groups respond to base rate cut

Date:Friday 9th January 2009
Author: Rachel Fletcher

Mortgage-based organisations have been giving their responses to yesterday's base rate reduction by the Bank of England to 1.5 per cent.

The Council of Mortgage Lenders called the move "a double-edged sword for retail-based lenders".

It explained that borrowers might be able to repay their mortgages more quickly as rates drop, but said that the detrimental effect on savings rates would make it harder for mortgage lenders to get the deposits they need to maintain lending.

Robert Sinclair, director of the Association of Mortgage Intermediaries, said that the real problem in the mortgage market is a lack of liquidity.

He urged the government to take the mortgage finance measures outlined in the Crosby Review.

Meanwhile, the Royal Institution of Chartered Surveyors also called for more government action to help first-time buyers and homeowners wanting to move.

While welcoming the rate cut, it said that this was not likely to motivate banks to increase finance availability.

"The risk is that lenders are set to become even more restrictive over the coming months in the face of the worsening economic climate," it said in a statement.