News In Focus
Warners optimistic about interest rate cut
The Bank of England’s decision to cut the base interest rate to an all-time low of 1.5% could help encourage buyers back into the property market, according to one of Scotland’s solicitor estate agents.
Scott Brown, estate agency partner at Warners, believes that the unprecedented move - rates are now at their lowest since the Bank of England was founded in 1694 - could stimulate activity on the property chain even if not passed on by mortgage lenders, as buyers start to realise that the banks will not pass further rate cuts to their customers.
He said: “Any move to re-stimulate the economy is to be welcomed and this latest cut in interest rates is a very positive step. Even if the banks do not pass this rate on fully to their customers, I think it will still have a knock-on effect on the housing market.
“There are some people who have been waiting for interest rates to level out before they make a purchase and this could encourage them to finally take that step. If, as is expected, the banks do not pass the full rate cut on, then it will be clear that these lenders’ interest rates will not go any lower than they are at the moment – and therefore borrowers will not get a better deal.
“Of course, what we now need to happen is for banks to start lending more to borrowers, which will help encourage people to purchase a home. Once this happens, it should help to stimulate the housing market and, ultimately, the rest of the economy.”
Edinburgh prices and transactions sharply down
Mortgage lenders Lloyds TSB and Nationwide said they would pass the full 0.5% drop on to their borrowers on the standard variable rate. Other lenders have failed to pass on previous cuts in full.
Buyers may also hold back if they believe prices have further to fall. Figures released yesterday by the Edinburgh Solicitors Property Centre showed prices in the capital falling by over 10% in the last quarter of 2008, and 8.5% in east Scotland as a whole. This contradicts the figures from the Nationwide earlier in the week which pointed to a 0.1% rise across Scotland in the same period. The volume of sales was 825 compared with around 2,500 for the same quarter in 2007.
Business experts have said that more efforts need to be put in place to ensure banks can lend more easily. Andy Willox of the Federation of Small Businesses in Scotland said the federation would like to see a guarantee that the banks would not only pass on the interest rate cut, but that they would also make sure there were flexible financing packages in place for the small businesses that needed it.