The Bank of England MPC has cut the cost of borrowing for the first time in two years, reducing interest rates by 0.25% to 4.5%.

Howard Archer, chief UK economist at Global Insight, believes that this weeks reduction will be followed by another 0.25% cut before the end of this year. He forecasts that interest rates will fall to 4% by spring next year.

"The below-trend growth of the past four quarters and the prospect of a continuation of this trend in the near term at least will reduce inflationary pressures.

"Furthermore, we do not believe that a modest reduction in interest rates over the coming months would cause the housing market to re-ignite, given that affordability ratios are still very stretched on several measures," Mr Archer said.


Mayor Livingstone wants more homes

Ken Livingstone, mayor of London, wants an extra 8,500 homes to be built every year in London following a study of potential development sites.

A recent London Housing Capacity Study (LHCS) reveals that from 2007 to 2017 there is capacity to build 31,500 new homes every year across the capital. Consequently the mayor plans to raise the housing provision targets in the London Plan from 23,000 to 31,500 additional homes a year.