Christian Harper of Chiswick estate agent Oliver Finn: " I welcome the Bank of England decision to cut rates by 1.5 percent: This is fantastic news for anyone wanting to buy a home in W4. The market has received the kick-start it needs and consequently it is currently cheaper to buy a property in Chiswick than to rent.”
“To give you an example I know a young couple who were buying a one bedroom flat in Chiswick at £260k. They pulled out due to the uncertainty of the current economic climate and instead are paying rent of £1400 per calendar month for a very similar property.
“If this rate cut had been in place when they were buying a flat, they would be paying £850 per month on a mortgage, and be better off by £550 a month. I would advise the public to jump on the market quickly before prices start to rocket in the New Year.” While the majority of commentators welcomed the Bank's decision to cut rates by 1.5 per cent, many were concerned about whether or not lenders would pass on the reduction to borrowers.
So far, only Lloyds TSB, the bank which is accepting around £5.5 billion in taxpayers cash to shore up its balance sheet, and Abbey, the UK's second biggest lender, have promised to pass on the historic 1.5 percent reduction to borrowers on variable rate deals.
Here are some more responses to the Monetary Policy Committee's announcement:
Martin Lewis of MoneySavingExpert.com: “Before this cut was announced, when it was predicted to be just 0.5%, there was scorn that mortgage lenders wouldn’t pass the cut on. At 1.5% that’s virtually unthinkable, though it's doubtful the WHOLE cut will be passed on.”
- Fixed Rate Mortgage: No change, as your rate is fixed.
- Tracker Mortgage: Your rate should drop by 1.5%, unless it has a ‘minimum rate’ clause, which may mean you do not get the full cut.
- Discount/Standard Variable Rate: The lender can decide willy-nilly what it’ll do. Most will drop the rate somewhat, perhaps 0.5-1%.
As a rule of thumb per £100,000 of mortgage a 1.5% point cut will save you roughly £120 a month, and 1% will save you £80 and 0.5% £40 a month.
BBC economics editor Hugh Pym: "The Bank of England is using terms like 'very marked deterioration in the outlook' and 'severe contraction. It is clearly very concerned about the possibility of a prolonged recession in the UK.”
Council of Mortgage Lenders, director general, Michael Coogan: "This is a strong and decisive move by the Bank of England. They have grasped the nettle in a worsening recession environment. What is important is how this feeds through to lenders' borrowing costs - and lenders will need to balance the interests of savers, as well - but such a sharp downward movement provides more room for lower borrowing costs more quickly."
Royal Institution of Chartered Surveyors, chief economist Simon Rubinsohn: "This is a bold move by the Bank of England and one which RICS welcomes. This recognises the severity of the downturn and the squeeze on credit. This reduction in the rates should now enable lenders to pass on a significant amount of the benefit to the high street.
"Those at the margins on variable rate mortgages will breath a sigh of relief as they find their mortgage repayments more affordable."
Building Societies Association director general Adrian Coles: "This reduction in the Bank Rate will provide some support to the housing market and especially borrowers on tracker rates. However, borrowers looking for new fixed rate deals or homeowners with mortgages linked to money market rates will not necessarily find their mortgage rates decreasing.
"Building societies will do all they can to ensure that the cost of mortgage borrowing is as low as possible. However, the Bank Rate is just one of the issues that they have to consider."
Ben Thompson, Legal & General's Mortgages Director: "The cut today is welcome, but sadly many borrowers aren't going to benefit. There's no obligation for lenders to reduce their standard variable rates and if last month is anything to go by, most will be reluctant to cut their SVRs significantly because these rates look relatively good value at the moment.
"However, swap rates are gradually starting to come down, albeit much slower than we would like, and this should have a knock-on to fixed rate pricing."
Michael O’Flynn, content editor for FindaProperty.com: "Today’s cut in the base rate from 4.5 per cent to 3.0 per cent will only have an impact on the housing market if the reduction in borrowing costs is passed on to consumers. Our online poll of house hunters shows that a sizeable proportion of people are keen to see further price reductions to enable them to buy their first property or to trade up as the rungs on the property ladder get closer together."
