The Bank of England cut its base rate by 25bp on Tuesday to 4.75%, a rate not seen since the early 1960s. This followed Monday's 50 bp cuts by both the US Federal Reserve and the European Central Bank. US base rates are now at 3.00% with European rates at 3.75%.

Superficially, cheaper money is good news for debt-driven property investors, but according to Laxton borrowers are currently unable to take advantage of the new rates. Lenders are generally not providing fixed interest rate quotes beyond ten years, because there is temporarily no liquidity in the long-term interest rate swap markets. 'In recent days this has affected some property investors due to complete on geared transactions, a problem that will only be alleviated once liquidity returns,' said Laxton.

The problem is primarily affecting larger transactions of £10 million ($14.7 million) and upwards, looking for finance for 15 years and beyond. 'This is expected to be a short-term phenomenon but it may have an effect on some major transactions which are due to complete in the next few days,' said Laxton.

In general, however, decisive action by the central banks to cut interest rates has helped to ensure some degree of normality in the markets. 'This confirmation that they will take all appropriate action has been of considerable comfort to the markets,' Laxton said.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM Digital Member, you’ll receive:

  • Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Capital Markets
Office