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News Release


UK Base Rates Left Unchanged at 0.50%

Jones Lang LaSalle Comment

London, 10th June 2010 - As widely predicted, the Bank of England kept the base rate on hold at 0.50% in June, for the 15th consecutive month and there was no change to its quantitative easing (QE) programme which remained at £200 billion. It comes as little surprise to see the Bank of England MPC keeping the base rate on hold until the content of the forthcoming emergency budget (22nd June) is known.

UK residential property

Rob Bruce, Head of Residential Research at Jones Lang LaSalle, commented:  
"Consumer confidence is weak and mortgage lending remains at a very rationed level. Thus far, lending in Q2 has underperformed expectations at £490 million in April, according to the CML, as opposed to market predictions around £700 million. Lending levels once again lag the 6-month average. Altering the base rate at present would damage the fragile recovery in house prices."
"While base rates are one-tenth of the level seen two years ago the standard variable rate at which mortgages are available represents, on average, 60% of the rate two years ago.This disconnect in the cost of borrowing twinned to uncertainty in the future around economic stability leaves lending at a depressed level."
"However, the UK continues to attract international investment, with almost three-quarters of the buyer's interested in Prime Central London properties coming from overseas. While the devaluation of the Euro has put pressure on continental buyers we continue to see acquisitive US, Chinese and other Far-Eastern purchasers. Many of these buyers can capitalise on local currency gains in excess of 30% against sterling when viewed over a 3-year time frame."
UK commercial property
Paul Guest, Head of EMEA Research at Jones Lang LaSalle, said: 
"Given the continued risks to economic recovery, corporate occupiers are displaying cautious optimism. Occupiers continue to develop real estate strategies, however most of these plans have yet to be implemented. Take-up stabilised around levels seen in the previous quarter but remains short of long term averages. Occupier caution has continued to act as a brake on transactional activity."
"In the absence of strong economic growth, current demand activity remains driven by lease events, consolidation, portfolio churn and the realisation of space efficiencies rather than expansionary plans. On the supply side, completions are beginning to decline. Stabilisation of real estate markets is not predicated on the basis of marked increases in occupier demand. Instead the impetus is a constraint of high quality development being delivered to the marketplace