Pick up in house price growth seals a May 2007 interest rate rise

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 Monetary Policy Committee’s 10th anniversary look like a certainty.

The pace of house price growth almost doubled during April to 0.9 per cent, up from 0.5 per cent in March. This brings the annual rate of inflation back into double digits at 10.2 per cent 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 per cent between February and April, the lowest three-monthly growth rate since last August.

Caution against sharp rate rises which could destabilise the market an industry economist, said: “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. “Talk of rates climbing to 6 per cent 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, they could also lead to widespread payment difficulties which, in an illiquid market, could precipitate price falls.”

Back to UK News Homepage

 

In addition to the services offered on this website, you can also access useful information about how to claim endowment compensation, compare credit cards, compare mortgages, compare remortgage, compare loans & compare insurance with the UK Finance Specialists at Moneymatchmaker.com.

We specialise in helping with bad credit mortgages, bad credit loans...

Try our online share trading with the best UK deals available....