Wednesday, May 11, 2011

Lower Growth = Lower House Prices

Bank cuts growth forecast

The Bank of England today cut its growth forecast for the UK as it warned the squeeze on household incomes and Government austerity measures will continue to weigh on the economy. A continued surge in energy prices - including the cost of crude oil and soaring utility bills - will hit growth and increase the cost of living in 2011 and 2012, the Bank warned. Related articles The rate of inflation, currently at 4%, is now expected to hit 5% this year and remain above the Government target throughout 2012 before falling back in 2013 - but only if interest rates rise in line with market expectations from the third quarter of this year.

Posted by khards @ 12:18 PM (2266 views)
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9 thoughts on “Lower Growth = Lower House Prices

  • Today’s economic forecasts are made on the assumption that interest rates, currently at an historic low of 0.5%, increase in line with market expectations, which currently show rates hitting 1% by the first quarter of next year.

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  • brickormortis says:

    wasn’t inflation meant to fall back in 2009 and then 2010….and then 2011 and then … and then …..

    I can’t help thinking about monkeys and typewriters when i reaed sentences like ….is expected to…..” or “…. is predicted by experts to….”

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  • In my mind both non wage inflation and higher interest rates erode peoples ability to a mortgage hence lower house prices.
    Higher interest rates would be a preferred solution as it would mostly affect mortgage payers.

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  • orcusmaximus says:

    @brickormortis – you forget, the BoE’s primary target is keeping house prices high. Inflation has been a secondary target for many years now.

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  • The economists at the BoE (and elsewhere) appear to look at the long term trend lines for GDP growth, and assume it to be somehow a God-given certainty that defies logical explanation.

    As I’ve been pointing out for years, the core engine of GDP growth – the ability to achieve more for the same amount of effort – has been slowing since the turn of the Millennium; although for the first few years of the new century it was masked by the debt explosion, the import of ever cheaper products from China, and cheap labour from eastern europe.

    Debt growth has now flattened, Chinese products are costing steadily more and the influx of Polish workers appears to have steadied, if not reversed; with the result that the small amount of underlying GDP growth is being pushed close to zero.

    Britain can probably handle it, with a little re-adjustment; but in the eurozone, the arguments that the PIIGS can pull themselves out of the mire collapse without the magical input of unearned GDP growth….

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  • BofE forecasts are just designed to keep the masses doped up. By the time these turn out to be wrong, the sheeple have forgotten all about them and are probably more interested in their next mobile phone.

    The bank’s only real aim is to create constant inflation to secretly tax away people’s savings. One of the “benefits” of this is to keep property prices sky high, which pleases its political masters, who want to retain the support of dim voters and big financial interests.

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  • We are seeing the arsend of what has fuelled growth in the past.

    That’s the trouble with ponzi economies, they don’t lasts forever. Bye, bye happy days, back to below square one.

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  • mark wadsworth says:

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  • markj69 str05 says:

    Complete and utter F00KWIT.

    Allowing banks to profit more because of the increased gap between BOE base rates (Kept low) and actual mortgage rates (Creeping up).
    Whilst also screwing savers with low IR’s. Wealth shift from the masses.

    Come on Karma work your magic!

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