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News Release

UK Base Rates on Hold at 0.50%

London, 7th May 2009 - The Bank of England kept interest rates on hold at 0.50% today, the second consecutive month the Bank has left it unchanged. The Monetary Policy Committee (MPC) minutes last month showed that all nine members of the Bank of England’s MPC voted unanimously to hold the base rate in April. 
UK residential property

James Thomas, Head of Residential Development and Investment at Jones Lang LaSalle, said:
“The Bank of England kept interest rates on hold again this month and extended its asset purchase programme to support the economy from £75 billion to £125 billion.

Hopefully some of the increase in the supply of money will find its way to mortgages. There is some evidence of this as inter-bank lending has showed signs of improvement. The spread between the base rate and 3-month Libor, on which most mortgages are based, has fallen considerably, to the lowest level since September 2008. Mortgage approvals have also increased consistently since the start of the year to reach 39,000 in March from 38,000 in February and 32,000 in January. The figures suggest that falling house prices and low interest rates may be encouraging some buyers back into the market”

“Although there are some signs of stabilisation, the overall tone of the market is still negative. Unemployment continues to increase, with some analysts predicting that it will rise above 3 million by the end of next year. This will hit potential buyers who may be reluctant to commit to new purchases.”

UK commercial property

Paul Guest, Head of EMEA Research at Jones Lang LaSalle comments, “With economic forecasts seeing further downward revision, prospects for the occupier market are bleak. Demand for commercial property will continue to be weak as cost cutting is still the main focus for corporates. Therefore, further rental declines are expected across all the sectors.”

“There is increasing divergence in the investment market between prime and secondary assets. We expect to continue seeing increasing price discrimination on secondary properties.