UK Property Market to Be Unaffected by Bank of England Measures

The Bank of England has cut the base interest rate to the all time low of 0.05%, and began what it calls quantitative easing aimed at injecting £75million into the UK banking sector, but these measures will have little or no positive effect on the UK property market.

The low interest rate will benefit the people who are on a base rate tracker mortgage. But for the people currently trying to buy homes, the continual rate cuts may be worsening the situation by making the banks charge higher rates to new lenders to offset their losses -- that is of course for the very few people who can raise the capital to pay the 15-20% deposit asked for by most banks these days.

Yolande Barnes of Savills, however, has commented on how the interest rate cut will make UK fuel demand from equity rich investors, seeing the rates offered by long term bonds fall and property become a more profitable. "Equity-rich investor buyers can benefit both from falling prices and the opportunity to gear up at advantageous rates. If this opportunity is seized it could, arguably, bring the first stage in a top-down market recovery into view," said Barnes.

I however share my namesake Liam Bailey, of Knight Frank's view, that the quantitative easing is likely to be seen as no more than a buzzword, if having little more effect, and that the government's efforts to force the nationalised banks to increase mortgage lending