Fall in mortgage lending ‘could see interest rates cut’

The fall in the number of mortgage deals agreed in October could mean that the Bank of England will opt to reduce the base rate of interest next month, it has been suggested.

Simon Rubinsohn, chief economist at the Royal Institute of Chartered Surveyors, is convinced that the latest mortgage lending data from the bank could persuade rate-setters to cut the cost of borrowing before the end of 2007.

Mr Rubinsohn remarked: “Today’s data will strengthen the hand of the doves of the monetary policy committee ahead of next week’s meeting and could just swing the balance in favour of an early cut in interest rates.

“This would provide some welcome relief particularly for first time buyers who are feeling the full force of the credit crunch as lenders become more discriminating in their lending activity.”

According to the Bank of England’s figures, the number of loans handed out by mortgage lenders was lower in October than the monthly average and than was the case in September.

A cut in the cost of borrowing would ease some of the debt management pressure felt by thousands of households around the UK, who have seen the base rate of interest rise five times since August of last year.