Rates decision 'highlights tough mortgage conditions'

11/09/2009

The Bank of England's decision to hold interest rates at a record low of 0.5 per cent for a sixth consecutive month underlines the "very difficult" conditions facing many first-time buyers and mortgage customers, the Association of Mortgage Intermediaries has said.

Robert Sinclair, the organisation's director, said banks are still limited in their ability to lend money to both consumers and businesses.

He added that while the Bank of England's quantitative easing programme, which effectively involves printing money to pump £175 billion into the economy, is a welcome measure, its results have not been "immediately visible and are not directly assisting public confidence".

A move to negative interest rates may be needed to encourage more lending to first-time buyers and to help those already on higher loan-to-value mortgages, Mr Sinclair added.

"This would assist in promoting the recovery that is showing early indications of arriving," he commented.

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