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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Sat Apr 28, 2007 1:19 am Post subject: Pick up in UK house price growth seals a May interest rate r |
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Pick up in UK house price growth seals a May interest rate rise
Pick up in house price growth seals a May interest rate rise
• Pace of house price growth picks up in April, but trend still shows a gradual cooling
• Market demand has been supported by movers, but this too is beginning to wane
• Too rapid an increase in rates could destabilise the market
• Current economic conditions suggest that a house price crash is unlikely
Commenting on the figures Fionnuala Earley, Nationwide's Chief Economist, said: “The Bank of England held off raising rates at the beginning of April, but the acceleration in house prices during the month makes a rate rise on the MPC’s 10th anniversary look like a certainty. The pace of house price growth almost doubled during April to 0.9%, up from 0.5% in March. This brings the annual rate of
inflation back into double digits at 10.2% and the price of a typical house up to £180,314, which is £16,741 higher than at this time last year.
“However, while the monthly rise in prices is stronger than the MPC would have liked to see, it can take some comfort from the fact that the underlying trend is softening and the return to double-digit annual growth largely reflects a weak period this time last year. The three-monthly growth rate, which smoothes the volatility of the monthly series, is still cooling in response to the earlier rises in interest rates. The latest figures show prices increased by 2% between February and April, the lowest three-monthly growth rate since last August.
Caution against sharp rate rises which could destabilise the market
“While a stable economic environment with contained inflation is essential for a well behaved housing market, we would caution against too sharp an interest rate response to current economic data. In our view, the talk of rates climbing to 6% and beyond are overblown and if implemented in the current climate could be damaging to housing market stability. With the market already showing signs of cooling, too sharp a rate hike could undermine market confidence and dry demand up swiftly. But on top of this, the could also lead to
widespread payment difficulties which, in an illiquid market, could precipitate price falls.
Movers have supported market demand…
http://www.marketoracle.co.uk/Article864.html |
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