The past few days have seen a plethora of new stories regarding the above expected rise in the rate of inflation. There is now a feeling that the Bank of England may have to raise base rates sooner rather than later. I would urge the Bank of England to hold their nerve in respect of interest rates as I think that the inflation pressures have been caused mainly by the rise in raw materials and also the recent rise in VAT. I think it would be catastrophic for the fragile economy if the Bank of England started to raise interest rates now.
I note with interest that the swap rates have soared over the last few days on the growing possibility that the Bank of England will have to put up base rates. The knock on effect is that lenders are withdrawing competitive fixed price deals and replacing them with higher rates as the rates on the money market increase.
This is having a very damaging effect on the economy as a whole and on the housing market in particular.
I personally felt that the Bank of England were slow in cutting rates when the economic crisis started and I hope they will not to make matters worse by raising interest rates too early.
Head of Property Services
The recent Nationwide house price survey indicates that house price inflation has hit 10.5%. Regular readers of this blog will know of my disdain and concern for house price surveys given their tendency to paint a misleading picture and also not to accurately show the basis on which they are benchmarking their headline. However, it was interesting to see that the Nationwide did post a note of caution in its report advising that the past 12 month surge would tail off later this year with sellers starting to outnumber buyers.
There was a reduction in the number of purchasers in the Dundee and Angus areas in the last 18 months, however, this was balanced with the number of properties coming on the market effectively reducing by half and then half again since the peak of 2007, keeping prices level and in some cases growing. We are now noting a huge increase in the number of properties coming on to the market, not back yet to 2007 levels, but moving in the right direction.
My concern is that with the lack of first time buyers and also the number of sellers who are non-movers, i.e. executry sales or people who are wishing to move out with the area, I think this will cause house prices to level off in the 2nd half of the year.
I am pleased to note that the property market is however gaining a momentum and one advantage (the only advantage!?) of the dreaded Home Report is that because of the high upfront cost at least you have to assume that every seller is a committed seller given the amount of money that is now involved in the process. I am sure that there will be more blogs over the next 12 months confirming the trend in prices and I will continue to update you.