Lower interest rates on the horizon for first time buyers

19-Sep-2007

First time buyers could see their difficulties in affording a mortgage abate somewhat in the coming months following the release of the latest economic indicators.

The Office for National Statistics (ONS) has said that consumer price inflation fell to 1.8 per cent in August, down from 1.9 per cent in July and meaning that inflation has come in under the Bank of England's two per cent target for the second consecutive month.

The Bank itself has revealed that its Monetary Policy Committee (MPC) voted unanimously (9-0) in favour of keeping rates on hold at 5.75 per cent this month, and with the financial markets having taken a turn for the worse since then, a rate cut could now materialise before the end of the year.

"With [a poorer economic] outlook, and following the 50 basis point cut in US rates yesterday, our expectation is for a UK rate cut this year, probably in November," revealed Jonathan Said, chief economist at the Centre for Economics and Business Research.

"First time buyers are helped when house prices are maintained yet struggle if mortgage payments are too high," commented Helen Adams, managing director of first time buyers advice centre FirstRungNow.com.

"It would be great to think that house price inflation was beginning to come under control but we haven't seen it slow for long before - it's not purely linked to interest rates or inflation - more a case of supply and demand.

"First time buyers continue to need help from the government," Ms Adams added.

The Bank had previously raised interest rates five times in the past 13 months, making life difficult for many first time buyers in the process.

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