Instant Access Properties

If there had been any doubt about the desire of the Bank of England's monetary policy committee (MPC) to reduce the base rate in its February meeting, all such notions have been swept away today by news that the body voted emphatically in favour of the reduction to a base rate of 5.25 per cent, a move which may help boost the property market by lowering mortgage costs.

The publication of the minutes today indicated that the forecasters had been right. Before the meeting all 60 economists polled by Reuters and 58 of the 61 who spoke to Bloomberg predicted exactly the outcome which eventually took place.

In the minutes, as in the original announcement of the decision and in last week's quarterly inflation report, the message was the same, that the decision was based on a careful balancing act between too many cuts at a time when inflation was likely to rise in the short term and too few, which could lead to stunted economic growth and an undershoot of the inflation target.

Such a decision might be imagined to be likely to lead to a split between the hawks and doves. Yet the only evidence of this is that arch dove David Blanchflower, after being the only supporter of a cut in January, broke ranks again this month by backing a half-point cut. In the main, however, the reverse is true. Earlier this week, renowned hawk Tim Besley told the institute of Fiscal Studies he too was in favour of the "balanced" approach to the assessment of inflationary and deflationary factors. Global Insight chief economist Howard Archer told the Times this shift in emphasis was "significant".

Meanwhile, another dove, the Bank's deputy governor Rachel Lomax, said yesterday that there was little point in holding back from further rate cuts because of a likely inflation surge this year, since "there is little that monetary policy can now do to dampen this peak". Of greater concern, she commented, was the situation in markets such as property. Therefore, one may safely assume that Ms Barker's vote will be in favour of future cuts unless and until the property market is seen to be recovering.

Some evidence of this may already have emerged in the wake of the December rate reduction. Figures from the Council of Mortgage Lenders (CML) showed today that gross lending reached £26.5 billion in January, only slightly down on the £26.6 billion of January 2007 and 11 per cent up on December 2007, when the total was £23.9 billion.

Responding to the news, CML director general Michael Coogan was cautious, suggesting not that the first month when the effects of the first rate trimming could be felt had produced evidence of its effects, but rather that the situation was volatile, that the figures could go down again and that remortgaging was a bigger factor than housebuying.

Mr Coogan's point was to use the announcement of the figures to call for an easing of housebuyer burdens in the forthcoming budget through changes to stamp duty thresholds. It may be that this agenda was what prompted his reaction to the lending figures, since it is slightly at odds with the view the CML has expressed, most recently in this week's news and views digest, that this year will see an improvement in affordability partly due to interest rate cuts.

Of course, further growth in mortgage lending in February and perhaps more so in March, when the February cut has fed through, may provide additional data on which to assess whether a trend is emerging. What appears clear enough from the sentiment of the MPC at present is that the "balanced" view is currently tilted towards monetary loosening, with the consequences for the property market, at least for Rachel Lomax, seen as a barometer of how much more this process must go.