The Building Societies Association has warned that a further cut in interest rates from the Bank of England could affect mortgage availability.
The troubled mortgage market will be hindered rather than helped if the Bank of England cuts interest rates again this Thursday (February 5th), the Building Societies Association (BSA) has claimed.
According to the organisation, a drop in the Bank's base rate will make savings accounts even less attractive. It will lower savers' income, but will also have a knock-on effect on potential homeowners.
Mortgage lenders need money from savers in order to finance their loans, BSA director general Adrian Coles explained. He said that the most "pressing issues" with mortgages was now not their affordability, but their availability.
"This suggests that what is important to potential borrowers is maintaining the flow of mortgage funds to the market rather than reducing interest rates further," he said. "Building societies and their subsidiaries were responsible for 62 percent of net lending in the fourth quarter of 2008 - a further reduction in interest rates now will make people even less likely to save and disrupt further the flow of funds into the mortgage market, which is already significantly short of lending potential."
The Bank's base rate is now at an unprecedented level of 1.5 percent, having been steadily reduced since October. By lowering interest rates, the Bank's monetary policy committee has attempted to encourage lending, in a bid to get the economy moving.
