Comments: House price inflation back in double figures

David,

What are your thoughts, following the recent set of strong figures, on a hike of 50bp at the next meeting?

Posted by John Brierley at April 26, 2007 12:05 PM

Dear David,

It looks like the medicine to date from the MPC just hasn't worked.
Put me down for a 0.5% increase in May. The signals that the bank has been sending out (press releases) for mainly financial institutions is quite clear and correct, i.e. tighten up your loan criteria or face the consequences. As i told you last year this liquidity tap must be tightened to drip only. Its frankly shambolic that yet another 30 billion or so was lend out lost month!!! where did that money come from......out of yours and mine future tax burden matey!

Best wishes
Arik Schickendantz

P.S a house in chelsea increased by 125.000 pounds ONE MONTH
I call the top of the market right now right here!!!

Posted by Ariks Schickendantz at April 26, 2007 12:56 PM

Dear David,
The MPC members have repeatedly stated that do not condition (directly or indirectly) their decisions on house price movements. If they did (which they do not), they would have to raise the base rate rather significantly since the long-term real house price trend figure (provided by Nationwide) indicates a huge positive “house price gap” (that is, house prices relative to a trend, or equilibrium).
Since 1990, however, the equilibrium has increased (this is clear from the figure). Therefore, house price pressures do exist but are rather less dramatic than they appear.
Thanks.

Posted by Costas Milas at April 26, 2007 03:28 PM

I do think inflation expectations are "priced in" before IR is heaved up. Heaved because i feel that the MPC is very cautious and some members can be appointed for their intuitive ability.

Any significant rise in interest rates woud be a plus point for the MPC, as inflation expectations (profit taking) do dampen upon significant or rather uncharacteristic action by the MPC.

All I can say is go for it, MPC!!!

Posted by Hitesh Damani at April 27, 2007 11:47 AM

Dear David,

Its very difficult for the market to give what has come their way, in terms of higher prices, and there be a hint of a slow down in inflation expectations which are contrary to the large fall the MPC expects.

Posted by Hitesh Damani at April 27, 2007 12:31 PM

It dosen't give any information on how regional variations have affected the annualised figure.

Posted by A Smith at April 29, 2007 02:22 AM

There is much variabilty in the house price inflation figures published in the different studies.

Hometrack has found that basically the market is already stagnant outside of London
"Cold spots put freeze on house price boom:
Sluggish performance in six areas adds to warning signs that the property market outside London is set to stagnate after years of runaway prices "
http://observer.guardian.co.uk/uk_news/story/0,,2068060,00.html

However, house price inflation should have nothing to do with the MPC decision in May (at least if you believe what they have said so far...)

Posted by Michele at April 29, 2007 07:24 PM