The Bank of England yesterday cut interest rates by 1.5 per cent to three per cent may not be enough to boost the housing market.

In giving its reasons for the rate cut the monetary policy committee stated: “Consumer spending has faltered in the face of a squeeze on household budgets and tighter credit.

“Residential investment has fallen sharply.”

The rate cut came on the same day Halifax revealed a 13.7 per cent drop in annual house prices.

While the aim of the cut is to benefit the economy, will the housing market now flourish?

Neil Chegwidden, head of residential research at Jones Lang LaSalle, is down beat over the future of property.

“Even despite today’s dramatic base rate cut, we believe it will not help the UK housing market in the very short-term,” he said.

“The fact is that the incredible escalation of financial events over the past couple of months has significantly heightened the likely depth and duration of a UK recession and has also weakened the economic outlooks of almost all other nations.

“So now, because of the latest round of financial crises and bail-outs, and in spite of the base rate cut, house price falls are likely to escalate again rather than ease and turnover is set to slow further.”

He added the usual property market fillip caused by an interest rate cut will not be evident this time around.

“Indeed the change is likely to create greater worry for households, initially at least, rather than provide a boost,” he concluded.

Daniel Lee, at property search engine Globrix, sees little difference for the property market.

“The property market is stagnant: the fact that nobody is buying or selling isn’t a symptom of high interest rates, it’s a result of overzealous lending and a decade of unsustainable property growth that has now come back to bite us,” he said.

“On paper, the latest rate cut is a bonus for homeowners just before Christmas, but in reality saving several hundred pounds in interest over the course of a year is hardly going to convince people to buy if they think the house they want could shed a further ten per cent of its value over the same period.

“Save £500 or £15,000 — that’s the question people will be asking.”

He added confidence will not be restored overnight and the obsession with rate cuts would draw attention away from the fundamental problems with the housing market.

“Prices are still too high and lenders are still not lending. Until both of these issues are resolved, I can’t see an end to the housing market slump.”

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics), was also limited in his enthusiasm.

“While the news flow in the near term on both the economy and the housing market will still be negative this dramatic step should provide important support for confidence,” he said.

“Those at the margins on variable rate mortgages will breathe a sigh of relief as they find their mortgage repayments more affordable.”

However, David Smith, senior partner, estate agents Dreweatt Neate, claims the interest rate cut could provide a false dawn.

“While cheaper money, generally, is good news, today’s dramatic 1.5 per cent cut in rates, as odd as this sounds, could be bad news for the property market,” he said.

“I’m very worried it will give vendors false expectations, and even lead them to raise asking prices, which would further stall transaction levels and be completely out of sync with the economic reality unfolding. This would be catastrophic for the property market.

“In our haste for an immediate recovery in the property market, we could set back the long term recovery.

He added: “Cutting rates is no magic wand, anyway, even by this much. Until the lenders start lending again, it won’t matter a jot.”