Principality: Interest rate drop nudged property market

Fri, 07 Oct 2005

A Welsh mortgage lender has said that the property market in the country was encouraged by the interest rate cut in August.

Peter Griffiths, chief executive of Principality Building Society, said that its estate agents had seen slightly increased interest after the Bank of England decided to cut interest rates to 4.50 per cent two months ago.

He suggested that the resurgent property market could bring benefits to other parts of the economy, and that "some economists believe a stronger property market will trigger a revival in consumer spending".

"Analysts are split on what the next move will be, with some predicting a rate cut next month while others expect no change until next year," he added.

Yesterday's decision by the Bank of England to hold interest rates steady came as no surprise to the Royal Institute for Chartered Surveyors (Rics).

The organisation believes this was related to the performance of the house market, but suggested that sluggish performance in the rest of the economy could bring interest rate cuts back on the table.

It said: "The economic climate has been more subdued in 2005. If the economy fails to show any signs of picking up over the next few months, Rics would expect interest rate cuts to be back on the agenda."

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