Q. So what impact if any has the reduction in interest rates by the Bank of England had on the current property market?
A. Buyer enquiries are on the rise but banks remain tight-fisted. Time for the Government to introduce a mortgage guarantee system, says RICS…
The time has come for the Government to take direct action to restore an orderly property market said the Royal Institution of Chartered Surveyors (RICS) in a statement issued this week. Their statement was issued after the Bank of England’s announcement of a further 0.5 percentage point cut in Base Rate which took interest rates to their lowest ever level of 1.5 per cent. The statement reads: “The rebound in new buyer enquiries may seem odd in view of the raft of negative news flow on housing but, in all probability, this upturn reflects the improvement in affordability resulting from both the drop in prices over the past year and the lower cost of borrowing flowing from previous rounds of monetary easing.
With many first time-time buyers unable to find the finance to take an initial step onto the housing ladder and existing owner-occupiers needing to move similarly blighted, the time has come for the government to take direct action to restore an orderly property market. As a first step in this process, RICS believes that the recommendation of Sir James Crosby to provide guarantees for the new issuance of residential mortgage backed securities (RMBS) should be adopted as soon as possible.
In the absence of such action, the danger is that potential homebuyers will continue to be frozen out of the market pushing transaction activity and prices to new lows despite the banks introduction of such competitive interest rates. Unfortunately job insecurities are also playing a tremendous part in the reluctance of many would be buyers along with the difficulty in obtaining finance.