Conditions in the property market will continue to favour home buyers for the foreseeable future after the Bank of England (BoE) revealed that it intends to keep interest rates at historically low levels for several years, it is claimed.

Brian Murphy, head of lending at the Mortgage Advice Bureau, believes that the announcement will prolong the golden age of fixed mortgage rates that buyers are currently experiencing.

The Bank’s Monetary Policy Committee recently voted to provide some explicit guidance regarding the future conduct of monetary policy, with new governor Mark Carney set to take a different approach to his predecessor.

It plans to not raise the interest rate from its current level of 0.5% until the UK’s unemployment rate has fallen to 7%, which could be in 2015 or 2016.

“The fact he (Carney) is in no hurry to push the button and implement a higher base rate until the economy shows prolonged signs of good health makes variable rates a more secure bet,” commented Mr Murphy.

“Lenders are already awash with funds and are sure to be considering how much further they can lower fixed rates to attract business. With many chasing their yearly lending targets, even better offers will be heading our way.

By harking back to pre-crisis levels of applications and high loan to value lending, Carney clearly expects the mortgage market to continue its recovery and is looking for it to play a big role in the re-emerging economy."

Although the UK’s economy recently celebrated a return to growth, the governor has pointed out that it remains the slowest recovering economic output on record.

A premature move to withdraw stimulus measures would therefore be in no-one’s interests – hence the decision to keep interest rates at their current level.

The BoE expects activity in the housing market to continue at its current growth trend but Carney has expressed concern about the construction sector, which he claims is still very much affected by ‘exceptionally weak’ productivity in the wider economy.

“House building simply has to increase if we want to avoid the housing and mortgage markets tipping over under the weight of growing interest and applications,” declared Peter Williams, executive director of the Intermediary Mortgage Lenders Association.

“The government would do well to follow the governor’s lead in taking a longer term vision when it comes to housing policy decisions.”

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