The Bank of England’s quarter-point interest rate cut will do little to help revive Britain’s commercial property market, experts said.
Savills said activity in the UK commercial property market tumbled 16% last month as economic growth slows and the credit crunch makes money more expensive to borrow.
The Bank of England’s Monetary Policy Committee cut interest rates by a quarter point to 5pc yesterday, but, according to Mat Oakley, head of commercial research at Savills, the real pain for the commercial property market rests in the money markets.
The rate banks now demand to lend to each other for a three-month period – known as three-month Libor – remains close to the highest levels this year and is hitting the ability of investors and developers in the commercial property market to raise cash in the capital markets. The cost for banks to borrow for three months breached 6% last week, the highest level since December, and are currently trading at 5.92375%.
Oakley told the Daily Telegraph: 'The interest rate cuts that we have already seen haven’t helped commercial property, in the same way that they haven’t helped the consumer side. Libor is bouncing around and simply not reflecting the cut.'