MPC can't cut yet

Ray Boulger of John Charcol, the UK's leading independent mortgage adviser commented "As today's no change decision by the MPC was expected, the content of the Bank of England's Quarterly Inflation Report due to be published next Wednesday will perhaps be even more interesting than today's decision. The MPC will have been aware of most, if not all, of the content of this Report and it should provide a good indication of the near term trend in Bank Rate. The fall of nearly 20% in the oil price from its recent peak, coupled with a sharp fall in other commodity prices, provides some optimism that inflation will start to fall later this year, giving the MPC scope to resume their rate cutting to try to fend off recessionary risks.

"With the Chancellor's confirmation that he is considering a temporary suspension of stamp duty, the already very low number of transactions in the housing market, approximately 60% down on last year, will diminish further until he sets out his proposals. After all who will want to commit to a property purchase now when it is probable that by waiting a few months stamp duty costs possibly running into tens of thousands of pounds can be avoided, and with The Chancellor's blessing.

"The Government's policy of leaking policy initiatives like this is not clever. They have been considering action on stamp duty along these lines for some time and should now announce a definite policy in the very near future."

What should borrowers do now Ray?

"Swap rates having fallen substantially over the last month, with 2 year swaps a whole percentage point down from their recent peak. This has allowed lenders to make sizable cuts in the cost of fixed rate mortgages but it is still too soon to buy a fixed rate as rates are expected to fall further. Borrowers who want or need the security of a fixed rate mortgage need be in no hurry to buy one, but with lenders having cut some tracker rates as well, current rates on the best tracker mortgages are also more attractive than a month ago, especially for borrowers who don't need to borrow more than 75% of their property's value. Trackers continue to offer the best value."