Interest rate drop to 5.5%

Interest rates dropped to 5.5% last week which was a welcome from most of the finance industry. Mortgage brokers, Lenders & Borrowers have all been sensitive to the market in the last 6-8 weeks due to a slow down, if not fall, in house prices and a high LIBOR rate which has made it difficult to source money on the open market. Although the LIBOR rate is still high compared to 3 months ago we are all hoping the drop in the Bank of England base rate will encourage Lenders to lower their interbank rate.
The obvious advantage to home owners is that many on a variable, tracker or discount rate will see their monthly payments reduce over the next few weeks. HBOS, owners of HALIFAX, and Nationwide were both the first to announce it had reduced its interest rates on their tracker and variable products.
However hopes of a change in the current housing market would be possibly over optimistic, a 1/4% change in interest rates save or cost around £40 a month on the average home. There is likely to be a re-index in the British housing market before anyone will see an increase in house sales. January and February should be extremely trying times for the UK.
The only market I can foresee growing will be the Bridging Loan and Discount Property Purchases market as they move in to purchase property from Distressed Sellers, people who cannot sell their home on the open market.
Not to be one for doom and gloom: The only thing to fear is fear itself. The market has a funny way of correcting itself and although it is likely house prices may fall in the near futurem, there is no real concern of a return to the 90's.
Enjoy your Christmas,
Daniel Morgan
Independent Mortgage Broker
FruitMortgages.com