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Property industry welcomes BoE decision to keep interest rates unchanged

While most believe that keeping interest rates unchanged at 0.5% is the right thing to do there is some unease about the Bank's decision to extend its quantitative easing programme by £50 billion to £125 billion.

'The Bank of England's decision to extend its programme of quantitative easing suggests that it is still fairly pessimistic about the economic outlook and, in particular, the outlook for bank lending,' said Royal Institution of Chartered Surveyors senior economist Brigid O'Leary.

She said, and others, have said that it is an increase in lending that is now needed urgently to help the UK property market on the road to recovery.

'The move also suggests that the Bank expects interest rates to stay low for the foreseeable future. So far, there has not been much evidence that quantitative easing has boosted bank lending significantly,' she added.

'RICS hope that increasing the size of the asset purchasing scheme will stimulate bank lending and help improve availability of mortgage finance. That is one vital way to allow the recent increase in buyer enquiries to translate into an increase in sales and may help to lift the housing market out of its depressed state.'

Jennet Siebrits, head of residential research at CB Richard Ellis said that the Bank is exploring new territory and needs to tread carefully. 'Extending the package by a further £50 billion is surprising, as there are very real inflationary concerns that could stall an economic recovery towards the end of the year,' she explained.

'A more measured approach is good for confidence and the residential property industry is starting to focus on the positive signs emerging in the market despite a degree of uncertainty,' she added.

There is also concern if the Bank decides to increase interest rates in the near future. Ray Boulger of mortgage broker John Charcol said that it is likely than when the MPC starts increasing bank rate it will move up quite quickly, which could be very uncomfortable for anyone still locked into a variable rate mortgage.

And Nicholas Leeming, director of, said an increase would not be good for the property market. 'A rise, however small, would knock fragile signs of renewed confidence out of the economy and the housing market,' he said.

'Base rates are so low that interest in property has picked up against the odds and a backdrop of rising unemployment. First time buyers especially are champing at the bit to take advantage of low house prices,' he added.