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10 Jan, 2008

Tanya Powley - 10-Jan-2008

The Bank of England has maintained interest rates at 5.5 per cent with commentators suggesting a rate cut is now due in February.
Some commentators have reacted with anger at the decision. chief executive Warren Bright warns that the BoE is "sleepwalking into a housing recession."
He adds: "Confidence in the property market is very shaky and many lenders have walked away from the mortgage market, or jacked up their rates and fees significantly. It is time for decisive action to reassure house buyers and sellers. Rate cuts must come on the agenda now.'

Connells Survey and Valuation managing director Ross Bowen also believes the BoE should have made a cut this month.

"Our data show mortgage approvals fell very sharply in December - this is yet to show up in official figures. More decisive action is needed to restore confidence to the housing and financial markets if we are to avoid the current doldrums having a more fundamental impact on the economy."

Head of Abbey Mortgages Nici Audhlam-Gardiner says: "The Bank of England's decision to hold the base rate at the current level was expected, given some mixed signals, a slowing economy but still the prospect of some inflation.

"While we've seen indications of house price growth in December, this came after a couple of months of house price falls and a drop off in activity from house buyers and sellers. Borrowers are still feeling stretched after the rate increases from the last couple of years, and those coming to the end of their fixed rate deals are still likely to see their interest rates go up.

She says that a rate cut is still looking probable in February, if the underlying market conditions do not improve.

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