Interest rate cut predicted - buy to let mortgages
04 February 2009

Analysts have predicted that the Bank of England is due to make another interest rate cut when its monetary policy committee (MPC) meets this week.

In a poll 11 out of 12 economists forecast that the MPC will trim the base rate on Thursday - something that could lower the cost of mortgages

the majority of those questioned said they expected a cut of between 50 and 100 basis points to be made.

"Whilst the Bank still has room to cut it should do so," commented Mark Swift of business organisation EEF.

And Charles Davis from the centre for economics and business research said: "Everything seems to be supporting the downturn at the moment. That might well push them into even stronger action than a 50 basis point cut."

But Simon Rubinsohn of the Royal Institution of Chartered Surveyors predicted that the MPC would hold the rate, claiming that the committee will cut in March instead.

Following a reduction of 0.5 per cent in January, the base rate currently stands at 1.5 per cent.

The Bank of England is likely to employ a number of measures to stimulate increased lending, it has been suggested.

Jonathan Loynes, chief European economist at Capital Economics, stated that interest rates are likely to reach zero, or very close to zero, in the coming months meaning the Bank will turn to other methods to improve the economic situation.

"They are going to want to try virtually anything as far as a policy stimulus is concerned," he remarked.

Mr Loynes suggested that the Bank of England will begin to buy corporate bonds as well as bonds from the government to lower interest rates in the long term.

An increase in lending and lower interest rates could benefit holders of mortgages

The Bank of England will reveal the outcome of its two-day February interest rate meeting next Thursday, with the possibility that the interest rate might be further lowered from its current level of 1.5 per cent.

Landlords who are willing to be flexible are most likely to emerge from the economic downturn in a strong position, it has been stated.

According to the Residential Landlords Association, the fact that tenants are struggling in the credit crunch does not necessarily mean that those with mortgages will suffer the consequences.

Director at the body Chris Town noted that opportunities still exist, with knowledge of the local area being key to ensuring that these are maximised.

"There's no doubt in my mind that some will find it really tough, however there is generally a strong demand for rental property in most markets," he said.

Current Rates- 02.02.2009
Bank of England Base Rate: - 1.50%
UK 3 Month LIBOR: - 2.16%     (-0.01%)
(The above LIBOR figure is provided by BBA, rounded to 2 decimal places)

UK Swap Rate  :-
1 Year :-      1.77%     (+0.06%)

2 Year :-      2.12%     (+0.05%)

3 Year :-      2.44%     (+0.04%)

5 Year :-      3.01%     (+0.02%)

7 Year :-      3.40%     (+0.02%)

10 Year :-    3.78%     (+0.02%)

Compiled by David Salmon



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