A new demand to cut interest rates

I recently read an interesting article on Adfero’s website about how changing interest rates will increase the amount of homes being bought and this in turn will help the economy to do a u-turn.  This is what they had to say:

Rapidly deteriorating conditions in the housing market can only be averted by a 0.5 per cent cut in interest rates, said the Home Builders Federation (HBF).

The HBF said the slowdown in the housing market poses a serious threat to the economy as a whole and the situation needs a fresh approach.

John Stewart, director of economic affairs at HBF, said: “Previous economic crises have led to housing market slumps, but this time the cart is leading the horse, with the speed and depth of the downturn threatening a serious wider economic crisis.”

“We just cannot rely on lessons learnt and solutions based on past downturns as this is a completely new situation in which we find ourselves,” he added.

The Bank said in its most recent inflation report, released in May, that it must focus on returning inflation to two per cent in the mid-term to allow economic growth to recover.

It also suggested that a cut in interest rates would increase funds available for lending and help quell the current mortgage crisis.

Are there other ways to stop this credit crunch? Will it be a repeat of the ‘87 disaster? What else can be done?

Post your thoughts…