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Latest Base rate decision
The announcement by the Bank of England's Monetary Policy Committee on 8th October to maintain the bank base rate at half of one percent for the seventh consecutive month comes as no surprise, comments Mortgage Solutions.
"The committee announced its continuance of the quantitative easing (QE) programme (effectively a further increase in the money supply) to bring the level of intervention in the economy up to an eye watering £175bn and this is due to be concluded during October 2009.
"Commentators have differing views as to the effect of the programme to date. The question likely to be posed at next months meeting will be whether the committee feel that further stimulus in the form of a further extension of the (QE) programme is required. As the economy is showing some small signs of increased economic activity some commentators are forecasting that we may prove to have returned to positive growth once third quarter figures are collated and published. If this proves to be the case this may signal the end of the intervention, alternatively, the committee may feel that further stimulus is required to ensure a sustained recovery.
"We have commented in previous months concerning where interest rates may be in future but now a leading economist (Roger Bootle) has forecast that interest rates in the UK will remain at their current level for the next five years although this is not a view held by all commentators.
"With the expectation that interest rates will be maintained at their current low levels certainly for the near future it was encouraging to see The National Association of Estate Agents report in September a rise on August in both the number of house hunters registering and the number of sales per branch and this certainly suggests house buyer confidence is increasing.
"The last month has witnessed some increase in the supply of mortgage products with the product numbers typically available to intermediaries rising from around 2,000 in September to around 2,200 in the first week of October reversing the recent slight declining trend in product availability.
"The increasing supply of products perhaps also shows a small increased confidence amongst lenders in the market and this may be partly borne out by figures published within the Bank of England's credit conditions survey that showed a reduction in defaults on mortgages in the third quarter and a decline in repossessions.
"Tracker products have continued to increase in popularity amongst borrowers taking out new mortgages although our own data continues to show that fixed rates remain the predominant product of choice for most borrowers with almost seven out of ten deals in September being fixed rates.
Along with the increase in the number of products we have also started to see some small element of price competition emerge largely in the sub 75% loan to value sector with rate reductions on a number of fixed rate and tracker deals."
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