eNewsWire

November’s meeting of the Bank of England’s Monetary Policy Committee (MPC) is widely expected to result in a second consecutive base rate cut of 0.5% but may not bring relief for homeowners.
Neil Young, CEO of property portfolio managers, Young Group, explains that whilst this would be good news for the 30% of home owners that currently have tracker mortgages, a reduction in base rate alone will not be the cure-all that many expect.

“A cut in base rate alone is not a magic bullet. The credit markets rely heavily on the bank’s confidence, reflected in the rate of interbank lending. The 3 month LIBOR rate has not fallen significantly since the Bank of England’s surprise half a per cent cut in base rate at the beginning of October and remains around 6 per cent. Unless LIBOR falls further, the cost of finance to banks and mortgage lenders remains significantly higher than base rate and lenders will not reflect the base rate change in their products because their cost of borrowing hasn’t dropped – and consumers taking out new mortgages won’t benefit.
“I wouldn’t be surprised if lenders begin to offer mortgage products that track LIBOR rather than base rate in the near future.” Read more…