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Loan rates could fall

1 June 2005

Mortgage approvals have leapt to their highest level for nine months Bank of England figures revealed today.

Economists now believe the property market is stable, with several saying the Bank might lower mortgage rates.

"The Bank of England mortgage lending and approvals data reinforce the impression that a relatively limited seasonal pick up is occurring in housing market activity," noted Howard Archer, chief economist at consultancy firm Global Insight.

And this has led traders to believe interest rates could fall in the next six months.

Simon Rubinsohn, chief economist at investment management firm Gerrard, pointed out that market predictions for December already show a quarter-point cut in interest rates could be on the cards.

But it was a prediction that both he and Mr Archer rejected.

"At this stage, there is insufficient evidence to confidently forecast such an outcome [a base rate cut]," Mr Rubinsohn commented.

He instead said a continuation of the current freeze in interest rates was more likely.

"The increasing signs of stability in the property market are likely to encourage the [Bank of England's] Monitory Policy Committee to hold fire as is the continuing strength in the non-retail service sector."

Mr Archer added that the data meant "an interest rate cut still seems unlikely for several months to come".

Bank of England data also out today showed that overall loans to individuals was at its lowest level since December 2003 in April, with credit card lending at a four-year low.