Article Suggests Merv Hiked Because Of His Fear Of H P I

[Realistbear]

http://investing.reuters.co.uk/news/articl...AIN-HOUSING.xml

Housing market revival may explain rate rise

Wed Aug 23, 2006 11:02 AM BST184

By Sumeet Desai

LONDON (Reuters) - The housing market has roared back to life this year and this may well be policymakers' unstated reason for raising interest rates.

The Bank of England surprised financial markets this month by increasing its main lending rate by a quarter-point to 4.75 percent, explaining it was concerned that faster economic growth would keep inflation higher for longer.

Plausible enough given inflation is already well above target and could even exceed 3 percent in the next few months, a point at which Governor Mervyn King would have to write a letter to the government explaining why it was so off-course.

But many experts suspect the central bank was also concerned that house prices, generally thought to be overvalued, are heading even higher and putting the market back toward the boom conditions of early 2004.

....../

But sharp movements in the cost of assets such as housing can have a big impact on inflation and policymakers were clearly alarmed when house price inflation ran into double digits two years ago.

The MPC raised rates back then too. And Governor Mervyn King explicitly told homebuyers to be wary in June 2004 -- comments widely credited with

taking the wind out of the market without precipitating a more dangerous crash

.

...../

"There is a risk house prices could accelerate further in the near term," said Matthew Sharratt at Bank of America.

The Bank of England is sure to be watching.

As Gordon's star begins to fall Merv will become more assertive IMO. The truth is that HPI-MEW is harmful to the economy as it sucks out money that could be spent on other things that are not just matters of opinion as to value. Apart from HPI-MEW, the UK is going south fast with unemployment on the rise, GDP far behind the EZ, trade deficit at record levels, factory output falling, public spending/M4 totally out of control......

[Casual Observer]

http://investing.reuters.co.uk/news/articl...AIN-HOUSING.xml

Housing market revival may explain rate rise

Wed Aug 23, 2006 11:02 AM BST184

By Sumeet Desai

LONDON (Reuters) - The housing market has roared back to life this year and this may well be policymakers' unstated reason for raising interest rates.

The Bank of England surprised financial markets this month by increasing its main lending rate by a quarter-point to 4.75 percent, explaining it was concerned that faster economic growth would keep inflation higher for longer.

Plausible enough given inflation is already well above target and could even exceed 3 percent in the next few months, a point at which Governor Mervyn King would have to write a letter to the government explaining why it was so off-course.

But many experts suspect the central bank was also concerned that house prices, generally thought to be overvalued, are heading even higher and putting the market back toward the boom conditions of early 2004.

....../

But sharp movements in the cost of assets such as housing can have a big impact on inflation and policymakers were clearly alarmed when house price inflation ran into double digits two years ago.

The MPC raised rates back then too. And Governor Mervyn King explicitly told homebuyers to be wary in June 2004 -- comments widely credited with

taking the wind out of the market without precipitating a more dangerous crash

.

...../

"There is a risk house prices could accelerate further in the near term," said Matthew Sharratt at Bank of America.

The Bank of England is sure to be watching.

As Gordon's star begins to fall Merv will become more assertive IMO. The truth is that HPI-MEW is harmful to the economy as it sucks out money that could be spent on other things that are not just matters of opinion as to value. Apart from HPI-MEW, the UK is going south fast with unemployment on the rise, GDP far behind the EZ, trade deficit at record levels, factory output falling, public spending/M4 totally out of control......

RB, you tend to pick up on stories about prices still rising to prove your point, and then minutes later you claim prices are crashing. I'm confused about your opinion, and some might think you want the best of both worlds

What do you believe is happening with house prices currently, are they rising, falling or not moving?

[Firangi]

What do you believe is happening with house prices currently, are they rising, falling or not moving?

Asking prices falling and houses are not moving at all.

[Realistbear]

RB, you tend to pick up on stories about prices still rising to prove your point, and then minutes later you claim prices are crashing. I'm confused about your opinion, and some might think you want the best of both worlds

What do you believe is happening with house prices currently, are they rising, falling or not moving?

The articles maybe reflecting the state of the market and the obvious confusion the sheeple are going through. One week its prices soaring and houses flying off the shelves and the next its stories like the Mirror broke about impending doom and gloom for property. The sheeple will soon be punch drunk.

Prices? Patchy, with the general trend down as the FT Index and ODPM results showed. W Midlands, my area, doing the best with much sharper falls than elsewhere.

Back to the thread--IMO it shows Merv may be more hawkish on HPI than many believed. No sane economist can see HPI-MEW to the extent it has stretched borrowers as a positive for the economy.

Edited August 23, 2006 by Realistbear