The much recent cut in interest rates by the Bank of England are obviously very welcome, but is unlikely to have a major impact on the flailing UK property market, according the property analysts.
The interest rate cuts announced this week, which the banks have passed on to their customers by reducing their standard variable rates, will positively affect those on variable rate mortgages, however over 50% of UK borrowers are on fixed rates of, meaning they will not benefit until their fixed rate ends.
The biggest impact on the UK property market however is not interest rates, but a lack of available funds to lend according to Savills research.
Savills property market analysts believe that the lack of new mortgages in the market place is the factor that will have the biggest impact. Whilst cutting interest rates will bode well for economic recovery, to boost the housing market there needs to be a serious injection of liquidity into lenders.
Yolande Barnes, Director Savills research stated 'The best we can hope for in the short term is a reduction in the unprecedented rates of house price falls. Over the medium term it may curb the extent of the downturn although the most likely outcome is that it will improve the prospects of a return to house price growth in 2010/2011.'
Many property market experts are in agreement that interest rate cuts are required which should kick-start the confidence building process. House prices are most likely to continue falling but property owners will feel some relief as the lower cost of borrowing takes effect.
The only way this will have a positive impact on the UK property market, is if lenders are encouraged to start lending again. Mortgage lenders will have to continue to cut rates again to make borrowing easier for people.
'Further action from the Bank of England is also needed if we are to break the vicious downward spiral of sharply lower mortgage lending, falling housing transactions, falling prices and declining home buyer confidence,' said Stewart Baseley, Executive Chairman of Home Builders Federation.
A cut in rates of 0.5% will not directly stimulate the housing market straight away but it is a move forward. The response of the stock market will be a good indication for the housing market.
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