The mortgage market will be hurt - not helped - if the Bank of England lowers its base rate any further, according to the Building Societies Association.
Lower interest rates will be bad for the economy and will not boost mortgage lending, the Building Societies Association (BSA) has claimed.
The Bank of England's Monetary Policy Committee (MPC) is set announce its decision on Thursday (March 5th) over whether or not to lower its base rate further. A number of analysts have predicted a cut of 50 basis points, which would leave it at 0.5 percent. Before the financial turmoil began, the rate had never been lower than two percent.
Cutting the base rate is often seen as a way of helping provide mortgage availability, with lenders passing on the cut to customers, meaning mortgages become less expensive. However, Adrian Coles, director general of the BSA, warned that what is needed is to "increase in the flow of funds into the mortgage market".
"The MPC should heed the point recorded in its own minutes covering its February decision - that 'there was a great deal of uncertainty about what would happen to banks' and building societies' ability and willingness to lend at low levels of interest rates'," he said.
"The Bank needs to fully assess the impact of the dramatic decisions on interest rates made so far before cutting base rate further."
