Comments: Shadow MPC votes 5-4 to hold rates

David

So, do you still believe that there will be no HPC (House Price Crash)?

You stated that the IR cut in 0805 would preceed further cuts. It didn't. Indeed not only was it reversed but added to and some. See above.
The housing market was strong in 2006 because of the economically inept cut in 0805. Thus, the estate agents, banks, developers etc could sell their hyped wares to ignorant BTLers.
There will be no spring bounce. The market in 07 will be as dead as 05 - the differences are that IRs are 0.5% higher than most of 05, there is inflation whereas previously there wasn't, oil has fallen back 40% yet there is inflation, oil is up 15%ish this year alone. IRs are unlikely to be cut.
With kind regards
Jonathan

Posted by Jonathan Davis at February 4, 2007 08:08 PM

Jonathan,
Good to hear from you. Yes, I still believe there won't be a house price crash. I think you may be getting some of your figures from Money Week, which is always unwise. Oil prices have not risen this year - even with the bounce of the past two weeks they are below the levels they started the year. The August 2005 rate cut has acquired near legendary status. I think even by then people who had stayed out of the market following Mervyn King's mid-2004 warning had realised that the house price crash school had got it badly wrong again. The market was recovering before the August 2005 cut - between November 2004 and July 2005, seasonally adjusted monthly approvals rose by a third. As I've said before, it is worth digging a bit into the numbers.
The housing market is at risk of getting into trouble only when the economy is in difficulty. Right now the global economy is enjoying its best run since the Second World war and the UK is growing very well. Enjoy it!

Posted by David Smith at February 4, 2007 08:35 PM

Hi David

I think a lot of us got "wrong footed" with warnings of a house price crash forever looming. But now that the rate is at 5.5% and inflation at 2.8% (0.8% above the 2.00% target) do you think we need to start being weary of the housing market, especially with the possibility of another rirse this year? I'm not saying a crash but the start of a housing downturn in the USA is not going to help. The only thing that I can think of saving us from further rate rises is the fact that the oil prices are now lower which should drive down energy prices and hence inflation.

Posted by stop repossession at May 22, 2007 06:55 PM

Although the prospect of another rate rise is widely predicted by many economists, the fact that inflation is now declining may mean that the outlook for interest rates is one of staying at these levels for the long term. Some are speculating a decrease on the long run, which will be interesting to see how it affects the homes market.

Posted by sell home fast at June 15, 2007 09:00 PM
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