Friday, August 4, 2006

How will the interest rate hike affect house prices?

How will the interest rate hike affect house prices?

MoneyWeek were among the few commentators to get it right on yesterday's rate rise - here's what they reckon it means for house prices.

Posted by mary @ 11:00 AM (560 views)
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10 thoughts on “How will the interest rate hike affect house prices?

  • The Bald Man says:

    This is a good sensible well balanced article far away from the usual hype.

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  • We don’t want to be smug – but we feel it’s only fair to point out that we were among the very few pundits to call yesterday’s interest rate decision correctly.

    And of course the many talented people here.. 🙂

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  • Retiredbanker says:

    At last the MPC has bowed to the inevitable and raised rates, but not by nearly enough.

    What an idiotic decision to cut the rate in August last year- unbelievable!

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  • The MPC later candidly admitted that the last August rate cut was a mistake.

    They didn’t bother to put it right though, and by waiting, inflation is going to soar as it’s already fed through to wage bargaining (at least in the public sector). Unemployment is still rising too, which contributes as well.

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  • Distant_daz says:

    I must admit that during the first few months of the year I was becoming a little disillusioned with it all – we all knew something would happen eventually but I was getting sick of waiting. I now genuinely beleive that this increase in base rate, as small as it is, will have a massive impact upon sentiment and I believe that this will be more significant than the financial impact. Combined with the higher profile of bad debt, personal insolvancies, increases in repossessions, rising unemployment I beleive that we can now say that ‘all the fundamentals are in place for strong house price DEPRECIATION in the short to medium term!!!’ Where are all the VI’s crowing about how great things are now?? I’d factor in another rise before xmas, or maybe early new year, then whatch all the BTLers panic and drop their FTB homes on the market! A friend had an offer accepted during the markets steppest growth phase (2 ish yr ago) only to be dumped, the house then being placed back on the market for 15K more. Lets see how this works in reverse: Desperate to sell?? – I’ll give you 100k today, or 85k in 2 months time if you drag your heels!! Actually, I won’t chase the market down, I’ll sit back and watch the pain first – why would I want to lose a chunk of my hard earned deposit to save some BTLers arse? ‘Some negative equity for you sir??’ No ta!! I can wait!!

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  • Yes, I found it astonishing that Merv admitted that the cut last August was “probably a mistake”, but then waited until now (i.e., after causing further damage and heartache) to do something about it. Savers have been disregarded for too long.

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  • Even a broken watch is correct twice a day. Not that I’m stepping in to defend the so called pundits but most were calling for or predicting a rate increase, just not now. By their own admission they were surprised by the timing. The MPC performs major surgery every month with a very blunt instrument. They do not care about your desire to own a postage stamp sized piece of the British Isles. They do care about the high levels of consumer debt (fueled by the availability of cheap credit) and keeping inflation down despite higher commodity prices all the while trying not to stunt this nation’s economic growth. Neverthless, they may be impressed by your credentials as an economist. I’m told there are two positions available.

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  • Even a broken watch is correct twice a day. Not that I’m stepping in to defend the so called pundits but most were calling for or predicting a rate increase, just not now. By their own admission they were surprised by the timing. The MPC performs major surgery every month with a very blunt instrument. They do not care about your desire to own a postage stamp sized piece of the British Isles. They do care about the high levels of consumer debt (fueled by the availability of cheap credit) and keeping inflation down despite higher commodity prices all the while trying not to stunt this nation’s economic growth.

    Reply
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  • bidin'matime says:

    Property group YourMove said: “The 0.25% increase will put some potential buyers off making their purchasing decision, not just because of this rise which in real terms is quite small, but because any rate rise knocks confidence…there is now a risk of the housing market slowing down…we need first time buyers to be able to come to the market with confidence, not worried about what will happen round the corner to interest rates.”

    Isn’t it just heart-warning to hear the VIs singing our song for once!

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  • Hehe, spot on bidin’matime. If someone is making the largest investment they will probably ever make in their life they should be thinking about what might happen around the corner anyway!

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