David Newnes, estate agency managing director at LSL property services, said: “The doves on the MPC are taking a bold stance today. They decision must have been made on the basis that the current inflationary spiral is only temporary. This is, on the face of it, good news for homeowners and mortgage borrowers. The prospect of securing cheap tracker mortgages will buoy the market, which has of late shown tentative signs of recovery and borrowers will be delighted that their repayments remain low. However, everyone should fear excessive inflation. Household incomes are being squeezed as wages fail to match the rising cost of the weekly shopping basket and this may even outstrip the savings being made by borrowers as a result of low rates on their mortgages. Unless inflation comes under control soon, the MPC’s boldness may begin to look like foolishness."
Eric Stoclet, CEO of Crown Mortgage Management said: "These are tough times for the MPC and today’s rates decision was inevitably going to be controversial. With GDP falling and inflation running at double the target rate, the doves and the hawks both have compelling arguments. Today the doves won out arguing that the current level of inflation is a result of high commodity prices globally rather than overheating consumer demand in the UK. Certainly, this is borne out by January’s GDP figures, but there is a limit to how far one can take this argument. Low repayment rates must be set off against a real terms rise in the cost of living and stagnating wages. If inflation continues at its current rate, the Bank faces a crisis of credibility which could do lasting damage to the UK economy."
Richard Sexton, business development director of e.surv, said: “If the MPC were going to do anything this month, they were going to raise the Bank Rate. With inflation at 4%, the decision makers know they need to do this. The question is when. The fact that the MPC didn’t increase the Bank Rate reflects their concern over the strength of the recovery. They are right to be nervous. The macroeconomic foundations that support the housing market are weak. Unemployment is high and there are further cuts in public sector budget still to come. We need the Bank Rate to stay down for as long as possible – we can deal with inflation when the economic recovery is assured. Lenders are beginning to loosen their purse strings at the moment. Higher LTV products are coming to the market. Buy to let borrowers are finding it easier to access finance. This is not time to start upsetting the apple cart.”
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