Little joy for homeowners

People hoping to see the value of their properties soar further as a result of last week's cut in interest rates will probably be disappointed.

While two small lenders have matched the base rate cut of 0.25 per cent, market leader Halifax set the tone for a generally muted response by trimming its standard loan rate by a token 0.1 per cent.

Analysts and lenders said the rate cut would have little impact on house prices, because home loan rates were already at historically low levels. Housing economist John Wriglesworth of Hometrack said: 'It's got nothing to do with mortgage rates. It's affordability. Mortgage payments as a percentage of income are nowhere near the peak.'

Halifax economist Martin Ellis said: 'At a quarter per cent even if fully passed on, I don't think it would have much impact. We've got very low interest rates anyway. We're not changing our forecast for the year, that house price inflation will be 9 per cent.'

Simon Rubinsohn, economist at stockbroker Gerrard, said that lenders might have decided to moderate cuts in mortgage rates hoping to prevent another surge in property prices. The rapid increases of the past year - with prices up by more than 25 per cent on average, according to leading surveys - have led to fears of a crash.

Analysts also suggested that the recent signs of a slowdown in parts of the market, particularly London, may have given the Bank of England Monetary Policy Committee confidence to cut rates in the belief that it would not put more heat into house prices.

Statistics due this week from the Land Registry are expected to show that while the average cost of a house has now broken the £150,000 level, price increases began to moderate at the end of last year.

Mortgage lenders are likely to use the rate change as an opportunity to boost margins.