CHL mortgages responds to base rate decision

It is unsurprising that the MPC has decided to hold Base Rate at 5% this month given the recent Inflation figures and the Bank's own view on Inflation's expected rise over the coming months. The medium to long-term view may be that Inflation will move back towards the Treasury's target of 2% next year, however, shorter-term factors are steering the ship at present. Rising food and energy prices are contributing greatly to the UK's Inflationary pressures while the economic slowdown including house price falls and fewer housing transactions provide a mixed range of issues for the Bank to digest.

In the mortgage market the Base Rate decision continues to mean very little in terms of the pricing of products. For many borrowers not on tracker rates, the Bank Base Rate has seemed irrelevant, given that most lender's own rate setting has not been tied to it.

Those investing in the buy-to-let sector are in the same position with the lack of funding available in the market continuing to impact on their ability to refinance. For those still lending buy-to-let pricing and criteria is much more realistic and responsible than 12 months' ago and those landlords with suitable financing are finding increased demand for their rental properties and increased yields. In this sense, buy-to-let continues to offer an attractive investment opportunity for those willing to take a long-term view.

MPC must not keep interest rates too high, longest serving member of the MPC has today warned that the BOE must be careful not to keep interest rates too high in the battle to fight inflation. The UK would escape a recession as seen in the 80's and 90's, but if interest rates were to rise this was more likely to tip Britain into an economic downturn.