Friday, October 2, 2009
Bearish Case Still Strong
"So prices can keep rising, but only if interest rates stay low and banks soften their terms for new buyers. But the reverse is more likely. If the UK economy keeps recovering â€“ and the International Monetary Fund has just said it will do so more sharply than previously expected in 2010 â€“ then rates will rise, probably well before banks return to pre-crunch levels of lending. That leaves house prices in an odd place. If the economy stays weak, rising unemployment and a lack of mortgage supply will keep a lid on a recovery. If the economy motors, rising rates could re-open the Pandoraâ€™s box of forced selling. Either way, the bearish case is still strong. "