Interest rates stand at 5%
07 August 2008
The Bank of England has once again voted to keep UK interest rates on hold.
The Monetary Policy Committee's primary goal is to keep inflation at 2% and it currently stands at 3.8%.
Most evidence points to annual consumer price inflation rising above 4% when July's figure is published next week.
And some economists feel inflation could top 5% before the end of the year, as energy firms raise their prices.
At the same time, activity is slowing in all key sectors of the economy, business confidence is waning and falling house prices and tight credit conditions have dented consumer spending.
David Bexon, Managing Director of SmartNewHomes.com, slammed the BoE's decision: 'With construction figures reported to have plummeted in July and housebuilders being forced to stall sites and cut jobs simply to survive in the current market, the Bank of England's decision to hold interest rates, yet again, seems a ludicrous one.
'Developers are working hard to break down the barrier preventing many potential buyers from entering the market, providing deposits and removing the additional burden of stamp duty across a number of developments.
'However, the Government needs to be far bolder in its approach to tackle the long-term challenges facing the UK housing industry, and introduce genuinely decisive proposals if it is to bolster what is currently a flagging market.
'The recent speculation surrounding the Government's temporary scrapping of stamp duty offers a glimmer of hope for potential homebuyers, but this, combined with a drop in interest rates and the freeing up of mortgage finance would have had a much stronger impact on today's market.'
Neil Chegwidden, Head of Residential Research at Jones Lang LaSalle, took a more pragmatic view: 'For the UK housing market, not even a 25 or 50 basis point cut would have been able to turnaround the fortunes of the ailing residential market. It continues to seem inevitable that house price falls will continue well into next year.'
'There are however some positive signals for the housing market as well as for household finances. For example, the Government has announced the postponement of the fuel duty rise in September and this week floated the idea that stamp duty may be waived or more likely deferred.
'Mortgage lenders have also cut interest rates on some products as competition increases for market share. However, none of these will be enough to halt the housing market slide as they do not tackle the greatest obstacle for the housing market at present - the difficulties faced by first-time-buyers'.
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