Bank backs up recent data on house prices
Last week the Nationwide Building Society released data that showed house prices had fallen for the first time in twelve years, and were 1% lower than they were a year ago. This data has now been backed by the Halifax, which has also reported that house prices are now lower than they were this time last year. This has brought increased gloom to the housing sector, which is already suffering as a result of the global credit crunch and tighter mortgage lending conditions.
Officials are now warning that the decade long property boom in the UK has come to an end, and with the bubble having burst many homeowners must now brace themselves for the rocky downwards journey. An official from the Halifax said: ‘We are expecting a modest decline in house prices in 2008, and there is a strong chance that will continue into 2009. House prices are high in relation to earnings so there is a problem for people entering the market, and there is a general squeeze on spending as well.’
There are now increased calls for the Bank of England to cut the base rate again, even though the central bank has already cut rates three times since December of last year, taking the rate from 5.75% to 5% during this period. However, officials are unsure as to whether the rate will be cut at the up and coming MPC meeting or whether it will now be June. This is because of a split on the last decision to cut loan rates, with some MPC members worried about rising inflation levels.
One official said: ‘Disagreement on the MPC has intensified between those members who are more worried about the near-term inflation outlook and those whose concerns centre on the weakening growth prospects.’
