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Homeowners could welcome a rate cut

Wednesday 6th February 2008

Homeowners would celebrate an interest rate reduction this month, it has been suggested.

Chris Coates, managing director of property developer Galliford Try Homes, observes that a cut in the base rate is "widely anticipated" at the Bank of Englands February meeting of the monetary policy committee (MPC).

Such a move would likely amount to a 0.25 per cent drop in the base rate - which is typically reflected in capped, tracker and some variable rate mortgages.

Any reduction would be likely to inspire greater confidence among consumers and industry practitioners alike, he predicts.

"The general feeling is that interest rates are on their way down this year and, by initiating a cut now, homebuyers and industry will move forward in 2008," Mr Coates comments.

He adds that the economy as a whole remains "on track" and that the housing market in particular is poised for a recovery.

In the south-east in particular, he reports that demand continues to outstrip the level of supply of homes for sale on to the market.

Despite his assertions, however, the latest Housing Market Update from Capital Economics detects a decrease in the number of Britons seeking mortgages in the wake of the credit crunch.

But as this is accompanied by greater reluctance among lenders to approve such borrowing, the analyst suggests the lack of demand may be irrelevant.

"If no one wants to borrow, the fact that less mortgage credit is available may not be all that important," Capital Economics contends.

Indeed, the report puts forward the proposition that a lack of demand among home buyers could be responsible for the perceived fall in mortgage approvals in recent months.©

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