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Brown Reaps Economic Whirlwind Of House Prices

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IN his first Budget as Chancellor, Gordon Brown promised that he would not let house prices get out of control and risk the sustainability of the country's economic recovery.

He went on to add that, "The failure to take early action guaranteed worse problems later on". However, despite those best intentions, runaway house prices are exactly what we have and, as Prime Minister, he is discovering we are now faced with the worst housing affordability crisis in modern history.

Government policy has had a direct impact on this situation. Low interest rates, over-accommodative lending, rampant speculation and failure to meet housing demand are the cornerstones of this problem.

The then Chancellor's decision to focus on the Consumer Price Index rather than the Retail Price Index removed owner-occupied housing costs from the Government's inflation target at the worst possible time.

Unfortunately, it is probably too late to backtrack on this. However, it is not too late to agree that the Monetary Policy Committee, the body which sets interest rates, can and should be targeting house price inflation, since it represents the single largest expenditure most people face in their lives.

great article from Liz @ priced out :)

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