Rate Cuts Not Helping To Boost New Loans
Over the course of the past couple of months we have seen the Bank of England reduce the base rate of interest on home owner loans and other secured loans by 2 per cent, to three per cent and it seems likely that we will see further rate cuts going forward, possibly even before Christmas.
Whilst this is great news for those borrowers with an existing homeowner loan or mortgage, particularly those with tracker rates on their loans, many of whom have made significant savings on their monthly repayments, it doesn’t seem to have made an awful lot of difference to somebody who is applying for a new loan to buy their home.
The latest figures from the Bank of England have shown that, although the monthly repayments on a new secured loan may now be more affordable than they were previously, encouraging more people to start thinking about buying a new house, many potential borrowers are still finding it extremely difficult to be accepted for a new home owner loan, as banks and building societies are still severely restricting their lending criteria and declining loans to potential borrowers who would probably have been accepted on prime rates just twelve months ago.
Even though it is likely that we will see further interest rate cuts over the coming months, it looks as though it is the hands of banks and building societies to provide the much needed boost to the housing market and this can only realistically be achieved by them relaxing their lending criteria and actually starting to offer new loans, on a sensible basis, with higher loan to value levels, affordable interest rates and charges, as per the Government’s conditions which were laid down in their recent financial rescue package for banks.
