Interest rate cut important for mortgage market

Further cuts in the interest rate would play an important role in helping to boost the mortgage market and improve the situation for those looking for a new deal in 2008, an expert has claimed.

Hints by the Bank of England that it could be set to reduce interest rates next year will help to reduce the problems faced by people coming to the end of their fixed term mortgages, according to Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors.

However, in the short term he envisaged problems for some homeowners looking to secure a favourable new mortgage deal, despite the Bank's actions.

"An early easing in the liquidity squeeze seems improbable despite recent action from the Bank of England. As a result, we expect that some would-be-buyers will struggle to get the necessary finance." Mr Rubinsohn said.

"We expect base rates to be lowered by at least another half point during the first half of 2008," he added. "This will provide an important layer of support for the housing market, helping to offset the threat posed by the increase in mortgage outlays as the resets for up to 1.4 million homeowners fall due."

Yesterday (December 20th), the Council of Mortgage Lenders revealed an eight per cent decline in gross mortgage lending in November.

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