Other Posts by Michael Aglony

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• Data indicates property market progress!
• Improved Funding for landlords
• At last - Funding for HMOs, Freehold Conversions & Limited Companies returns! 23.07.2009
• Increase in fixed rates as "perceived" inflationary pressures start to build. 22.06.2009
• Survey's report increases in house prices - 15.05.2009
• Base Rate stays at 0.5% for a second month - 07.05.2009
• Base Rate remains unchanged at 0.5% - 09.04.2009
• As the market bottoms out, now is the time to secure that property bargain - 03.04.2009
• The Turner Review may impact Buy to Let warns Lord Turner
• Now that Base rate has dropped to 0.5% it's time to fix!
• Northern Rock resumes lending - what will be its impact?
• Will everyone benefit from the 0.5% Base Rate cut?
• Bank Base Rate now seems set for 0.5% cut on Thursday
• B&B appoint Mortgages for Business for early repayment charge clients
• It looks like Bank of England Base Rate could drop to 1% next week
• Will Base Rate stay below 5% in 2009?
• It's all about cashflow!
• Mortgage Express are waiving all Early Repayment Charges!
• SWAP rates and LIBOR rates on the move in 2009 - 13.01.2009
• Bank of England Base Rate cut by 0.5%. How will this effect Buy to Let? - 08.01.2009
• Market awaits Year End movements at Banks
• Merry Christmas and here's to a better 2009!
• 3 month LIBOR continues to ease slowly - 16.12.2008
• LIBOR, SWAP rates, base rate and interest rates - we're seeing history being made - 11.12.2008
• The return of Buy to Let as a commercial transaction

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Base Rate reduced to 2%

By Michael Aglony

So Base Rate has been cut by another 1%. Bearing in mind Mervyn King's comments earlier in the month, the reduction is no real surprise and is confirmation (as if we needed it!) that we are heading for tough times in 2009.

All eyes now on the 3m LIBOR rate tomorrow and it will be interesting to see how the money markets react. 3m LIBOR yesterday stood at 3.79% and likely to be around 3.72% today. What we need now is for the gap between Base Rate and LIBOR to continue to narrow although it may still be a few months before we go back to the traditional spread of 15-20bps.

Today’s Base Rate reduction is great news for those on Base Rate tracker mortgages although with some lenders, collar conditions will now apply. It would not be a surprise to see a further cut early next year before rates level out and then start to increase slowly in 2010. SWAP rates continue to fall and provide an indication of the cost of longer term money and suggest that early next year could well be the right time to lock into a decent 3 or 5 year Buy to Let fixed rate mortgage. What is certain is that in the lead up to Christmas and despite today’s Base Rate cut, we are unlikely to see any real movement in mortgage products until January at the very earliest.

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