Lenders cautious as bank keeps rates on hold

The Council of Mortgage Lenders said its members set their rates according to ‘a complex range of factors’ and although lenders want to meet demand for loans, they have to run their business sensibly.

Director general Michael Coogan said: ‘It is utterly misleading to look at any individual benchmark rate - whether bank rate, Libor, or swap rates - and assume that the margin between that rate and the mortgage rate is pure “profit” in the way that some recent commentary has implied.

‘Mortgage choice is successfully beginning to widen. However, this is against the backdrop of funding markets which remain dysfunctional and cautious.’

Earlier today the Halifax published its house price index for August, which showed prices across the UK rose 0.8 per cent. Housing economist Martin Ellis said this was being driven by better affordability and low interest rates.

Construction data from the Office for National Statistics, which is also out today, shows public housing orders for the three months to July are up 15 per cent compared with the previous three month period. However, they are still 12 per cent down on the same period of 2008, and private housing orders are down 35 per cent.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: ‘Construction orders rebounded strongly in July, increasing by 40 per cent from the very weak June figures. The contribution from public sector accounted for most of this improvement,  with the advancing of capital spending programmes by the government begining to pay dividends - in particular, new infrastructure orders doubled between June and July.

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