A report by one leading mortgage broker has suggested that the Bank of England will cut base rates within the next few months, which may lead to competition between mortgage lenders, giving borrowers a greater choice of cheaper mortgages.
According to the report, the poor retail sales over the Christmas period were not enough to warrant a rate reduction on their own, but combined with the present slump in the housing market, a cut looks likely.
It is expected that lending will fall by around 8% this year, as mortgage providers are suffering the effects of statutory regulation, which is leading to a fall in lending, and, as the purchase market seems weak at present, they seem likely to target the remortgage market.
Our view
We are against this view and do not believe that interest rate cuts are due at all until the back end of this year.
Indeed, we suggest that if the market continues to resurface as it is, there may a another increase by 0.25% before long.