Good news! The Bank of England has today reduced the bank rate by 0.25%. This is a step which in itself will have little impact on mortgages etc but it does send a positive signal to hard pressed borrowers. If nothing else it indicates light at the end of the tunnel.
Many people have experienced £150 a month rises in the cost of their mortgage and this has come about because most mortgages these days are adjusted annually or are fixed rates or discounted rates. Add in to this scenario the recent hike in fuel costs – diesel locally at £1.09 per litre! and you can see why consumer demand has slowed.
In my opinion interest rates have always been something of a blunt instrument when it comes to slowing down the property market. In the late 1980’s and early 90’s interest rates rose to, albeit briefly, 15%. The property market was decimated and what needed a touch on the brakes began to appear as though someone had removed the wheels. It isn’t necessary to go to this extreme. They need to be a little more scientific about the process. It needs an ABS system for interest rates, to continue the motoring analogy!
We heard today of a bailiff in Hertfordshire attending two repossessions per day with the next week fully booked. Mr King and Mr Brown would do well to acknowledge that whilst controlling inflation is important those repossession levels are back to late 1980’s levels.