Bank of England's 'boring' decision not helping mortgage borrowers
The Bank of England has been criticised for making a "boring" decision yesterday, when it decided to leave interest rates at 0.5 per cent.
The decision, which was widely predicted in the financial industry, left the historically low base rate unchanged for the last four months.
But UK mortgage broker John Charcol has criticised the monetary policy committee's decision, and says mortgage availability is still too difficult, with the FSA compounding the problem of the supply/demand imbalance in mortgage funding.
Ray Boulger at the broker has advised borrowers looking to fix to think long term, saying the quantitative easing programme by the MPC has done little to aid the availability of mortgage finance.
He said: "This month Mervyn King achieves his aim of being boring.
"Despite the Bank of England having used about £75 billion of the funds it has agreed to commit under its quantitative easing programme it is hard to see any visible impact of this so far in terms of any real increase in mortgage availability.
"It may be that with the housing market performing better than virtually all the forecasts at the end of last year, albeit with activity still at a historically low level, the modest extra mortgage demand this has generated is enough to be the straw that breaks the camel's back."
The Association of Mortgage Intermediaries (AMI) agrees. They have said the availability of lending for home buyers must be freed up, with consumers unable to get a good long term mortgage plan due to most mortgages only being funded by six lenders.
Robert Sinclair, director at AMI, said: "This artificially low interest rate will have to rise at some point in the future to more closely reflect the true cost of money and the returns required by investors.
"AMI remains concerned that many potential first-time buyers are being frozen out of the housing market by the lack of available mortgages.
"We would encourage government, the treasury and the Bank of England to work with the FSA to encourage a controlled return of greater funding which would allow good building societies to return to the market with competitively priced products at higher loan to value percentages."
The question remains as to when the Bank of England will decide to change interest rates, with speculation rife as to when that will be.
Mr Boulger added: "It remains very uncertain how long Bank Rate will stay at 0.5 per cent but what one can be certain of is which way it will move when it does change."
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