Boe On Housing

[kingofnowhere]

Housing comments, from the minutes

http://www.bankofengland.co.uk/publication...006/mpc0604.pdf

18 House prices continued to rise quite strongly in the first quarter with the mortgage lenders' house price indices rising by an average of 2%. Activity indicators generally showed little evidence of any

imminent slowdown, although the number of mortgage approvals had been slightly down in February and there had been a small decrease in the number of new buyer enquiries in the preview of the RICS

survey for March.

[benjamin]

does this indicate a rate rise is a real prospect in the coming months?

[kingofnowhere]

does this indicate a rate rise is a real prospect in the coming months?

No, why should it? The MPC targets inflation, as measured by the CPI not real estate prices.

[Ferret]

No, why should it? The MPC targets inflation, as measured by the CPI not real estate prices.

Strange that during the period of rampant HPI they started raising rates from November 2003 ending at 4.75% afer HPI had slowed down considerably.

[kingofnowhere]

Strange that during the period of rampant HPI they started raising rates from November 2003 ending at 4.75% afer HPI had slowed down considerably.

Why is this strange? The economy was growing faster than trend, the inflation was above the 2.5% target at 2.8% and inflation expectations were for it to fall, but only on the back of interest rates rising between 4% and 5.5% 4Q05

The don't target HPI, what they try to do is get the consumer to spend or slow down spending, at because this means rising or lowering rates, then this impacts the housing market.

[delite1]

With oil as it is, inflation will be hitting the upper limits soon enough.

[kingofnowhere]

With oil as it is, inflation will be hitting the upper limits soon enough.

No it wont, it didn't last time oil hit this level.

Read this as to why the pass through rate has reduced.

http://www.bankofengland.co.uk/publication...2/speech171.pdf

[Bear Goggles]

With oil as it is, inflation will be hitting the upper limits soon enough.

No it's a new paradigm. Oil prices can now go up indefinitely without effecting inflation, as can property, all we need to do now is lower interest rates and everything will be gravy.

Of cause we don't need higher wages in the new paradigm because we can just borrow against the increase value of our home and buy Peugeots from eastern europeans, unless you were born too late to take advantage of HPI in which case you are just a bunch of doom monger losers that need to stop listening to your ipods and get a proper job, like an EA or something.

[dnd]

There are too many variables to cause a crash in current spending - debt, interest rates (Japan), hidden inflation (fuel)

IMO the media is hiding it well - the majority, that can't think for themselves, are walking into a hopeless financial situation

What great timing from the govenment to change the bancrupcy laws recenty

Edited April 19, 2006 by dnd

[othello]

The don't target HPI, what they try to do is get the consumer to spend or slow down spending, at because this means rising or lowering rates, then this impacts the housing market.

A very narrow view of macroeconomics. I suspect they may also consider the value of the pound abroad!

[Bear Goggles]

No it wont, it didn't last time oil hit this level.

Read this as to why the pass through rate has reduced.

http://www.bankofengland.co.uk/publication...2/speech171.pdf

Now I've managed to extract myself from cynical mode I saw this in the report:

Asset price misalignments are likely to pose a rather different kind of challenge. An

inflation-targeting central bank might improve macroeconomic performance by

reacting to asset price misalignments over and above the deviation of, say, a two-year

ahead inflation forecast from target. I believe that a clear signal from monetary

policymakers that they would, other things being equal, react to a housing market

bubble if one clearly emerged, would make the continuance of strong house price

growth less likely now.

So, one might assume that a house price bubble hasn't "clearly emerged" otherwise they would already be raising rates, but if this is the case what about other bubbles? Commodities? perhaps a bubble in commodities hasn't "clearly emerged" either, in fact perhaps none of these price rises are bubbles? What else could they possibly be? Inflation perhaps?

[right_freds_dead]

the bbc are doing a real diservice to its fee payers. a disgrace.

one side of the country is going down in high job losses and a dead high street.

while the bbc focus on 'slick willie' property hogs.

[Guest Charlie The Tramp]

Why is this strange? The economy was growing faster than trend, the inflation was above the 2.5% target at 2.8% and inflation expectations were for it to fall, but only on the back of interest rates rising between 4% and 5.5% 4Q05

The don't target HPI, what they try to do is get the consumer to spend or slow down spending, at because this means rising or lowering rates, then this impacts the housing market.

Excerpts from the MPC minutes of June 2004 after the back to back increase in rates as HPI was steaming full ahead. IMHO this was the rise which started to break the soaring HPI. A further 0.25% in August to 4.75% finally stopped the rising HPI until August 2005 when rates were cut by 0.25% signalling to the pundits that the next move could only be down. This appeared to give the HM a boost which will now fizzle out due the uncertainty of which way rates will really head in the future.

CPI inflation had risen by 0.1 percentage point to 1.2% in April. In line with pre-release

arrangements, an advance estimate of CPI inflation in May was provided to the Governor 3½ days

ahead of publication, and this suggested a rise of 0.3 percentage points to 1.5%.

There was mixed evidence on the strength of

household spending, and, while house price inflation was stronger than the Committee had envisaged

in May, there were tentative indicators that housing market activity might be easing.