Rate cut had little affect according to National Homebuyers
Added: (Wed Apr 23 2008)
Pressbox (Press Release) -
April's cut to the base rate of interest failed to have an affect on mortgages, potentially leading to financial difficulties for many.
John Charcol pointed out that the rate reduction did little for mortgage borrowers.
It is because the inter-bank lending rate remains high, forcing lenders to increase the rates on their mortgages.
People in financial difficulties will have been hoping that the reduction would have an effect but it failed to materialise.
"The connection between Bank rate and LIBOR (the rate at which lenders borrow money) has become elastic, and a pull on one end provides no effect on the other," said Katie Tucker from John Charcol.
"Previous short-term cash injections… have merely brought temporary aid; what the government needs to do is restore the inter-bank lending and resurrect the confidence of investors in the mortgage backed securities.
"The new market will inevitably be a more robustly risk-assessed and risk-priced version of its former self. This means that borrowing at high loan-to values or with credit problems will never be as cheap as in the last two years," she added.
Julian King of National Homebuyers adds, "The government has to be seen to be doing something to restore confidence in the market.
"We anticipate that the Treasury will get involved to ensure that the banks pass the rate cut onto the borrower, sooner.
"However, we do not feel that this will stop the lenders from keeping their rates high for borrowers with a less than, say, 20 per cent deposit".
Mr King is a director of National Homebuyers, the UK's leading quick property purchase firm. The company guarantees to make an offer to purchase any property in the UK for homeowners who need a quick sale. The company also provides a series of mortgage rescue solutions like Sell and Rent Back for homeowners who are facing repossession.