Knight Frank commercial comments on MPC’s interest rate decision

Claire Higgins, head of commercial research, Knight Frank commented: “This cut is in line with expectations, and unsurprising given the rather worrying indicators we have seen this week. Doubtless the Bank of England will be following the Fed in considering alternative means of stimulating the lending market, now there is less scope for cutting base rates. In the last year it has been direct intervention rather than rate cuts that have had the most effect, so this may be for the best. However, the MPC now has much less ammunition to cope should something unexpected come up in the next few months; although I expect base rates to go lower still.

“While further monetary easing is welcome, I doubt if there is going to be much near-term benefit for the commercial property market from today’s decision. Debt is hard to find and banks are demanding high LTV ratios, and that is unlikely to change soon, especially as falling property values are compounding the situation. Also, investors are rightly concerned on prospects for the occupier market given the unfolding recession. With this backdrop the slide for property values is going to continue for now whatever the Bank of England does.”

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