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News Release

London

Base Rates Left Unchanged at 0.50%

Jones Lang LaSalle Comment


London, 9th September 2010 - The Bank of England kept the base rate on hold at 0.50% in September despite the UK economy reporting its strongest rate of GDP growth for nine years in Q2. Wider economic concerns continue to outweigh above-target inflation.  The base rate has now remained unchanged for a year and a half.

UK residential property

Rob Bruce, Head of Residential Research at Jones Lang LaSalle, commented:
  
“As a consequence of supply increasing far faster than the rate of demand, pricing across the residential sector has shown consecutive monthly declines for the first time since early 2009. Transaction volumes are relatively flat with little additional gross monthly mortgage lending, rising just 5% to £13.6 billion.  Lending sits 3% lower than the equivalent figure a year earlier, according to data from the CML.”
 
“Analysing lending and inflation rates, the average standard variable rate for UK lenders is 3.92% this is 342 basis points above base; and 63% higher than the average margin over base throughout the past decade. In July consumer price inflation slid to 3.1% from 3.2% the month earlier. CPI is more than one percentage point above the long-term 2% target.”
 
“Sentiment in the market suggests the base rate will remain unchanged throughout 2010 unless wider economic conditions change significantly. Resulting in a housing market likely to continue to suffer in the short term, as public sector cutbacks and job loses become more apparent across the country.”
 
UK commercial property
 
Stephanie McMahon, Director UK Research at Jones Lang LaSalle, said:
 
"Occupier take-up has generally shown an improvement on the equivalent period last year, but activity will remain driven by lease events and portfolio churn rather than expansionary plans. The expected lack of public sector take-up following the austerity measures announced in the emergency budget is beginning to cause concern in markets beyond London, and in the current climate developers remain hesitant to initiate speculative schemes."
 
"Tightening supply of quality product is beginning to lead to shortages for certain product types and sizes driving rental stability and in some markets, growth. In contrast supply of second hand space is likely to increase further as occupiers rationalise requirements. The rental differential between prime and secondary product is expected to widen in most locations over the short to medium term, as growth returns to the former while conditions remain flat or soften in the latter."
 
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