The Bank of England’s decision to leave interest rates at 5 percent has been met with disappointment by the property industry in particular.
Generally it is felt that the Monetary Policy Committee has focussed simply on inflation rather than the overall health of the economy and there are fears the Government is letting the UK slip into recession because they are taking the necessary corrective measures.
A spokesperson for Quickmove .com said: As with Northern Rock they [the government] do too little too late and are now simply exacerbating an already difficult situation. It is pure hypocrisy to criticise the Banks for not reducing interest rates and boosting mortgage lending when they themselves are managing one of the biggest mortgage players of the last few years in an even more draconian way.
“If the Treasury had supported the Lloyds TSB rescue of Northern Rock they would be in a position where they could dictate but now they have lost all credibility and power. As has been said often before – the market is far from perfect but it’s a damn site better than Government!
“They need to wake up and wise up otherwise a controllable soft landing for the economy could spiral into a deep and lasting recession.
The Council of Mortgage Lenders (CML) was unsurprised by the MPC decision to keep rates on hold.
Michael Coogan, CML director general, said: “We understand the conflict between slowing economic growth and rising inflationary pressures, and the uncertainty over some of the data reflected in the split views of MPC members last month. However, the MPC had an opportunity to act to anticipate the worsening economic environment today, and it is disappointing that there has been no change.
“Mortgage and housing market conditions will remain challenging for the rest of this year, but the majority of existing borrowers are coping well.”
Simon Rubinsohn RICS chief economist said: The RICS is disappointed that the MPC chose to leave the base rate on hold. While the RICS appreciates the risks associated with the recent pick up in inflation and acknowledges the danger of it moving into 'letter writing' territory during the second half of the year, the tone of recent data and surveys suggest that the threat of a sharp slowdown in economic activity is the more pressing issue for the authorities.
“Housing transactions have collapsed, consumer confidence has sunk to its lowest level since 1992, the service sector appears close to stagnation according to the latest CIPS survey and the retail sector is under immense pressure. There is now a high probability of growth falling short of the Bank of England's expectations as set back in February. This will create the spare capacity to lower inflation in the medium term.
Significantly, the latest report from the REC (Recruitment and Employment Confederation) highlights the threat to employment from the deteriorating economic climate.
“The RICS believes that the Bank needs to take further pre-emptive action over the coming months starting with the June meeting in an effort to decisively counter the impact of the credit crunch. The RICS believes that the Bank should cut the base rate to 4.5 percent in June if there is no improvement in the data over the next month.”
