Thursday, March 5, 2015
Cook us up another scheme George:
When house prices slipped during the financial crisis, nobody was surprised. The property market had been scaling dizzying heights for a decade. The only surprise was that they didnÃ¢Â€Â™t tumble further. The Bank of EnglandÃ¢Â€Â™s decision to slash interest rates to 0.5% almost exactly six years ago gave the market a desperately needed shot in the arm. Six years later, this property market stimulus continues to be injected at maximum dose. But like any drug, the effects are finally wearing off. The sheer scale of stimulus pumping up house prices is so extreme we no longer notice it. In fact, we think it is normal. Despite the hallucinogenic low rates, the weird thing is they are no longer doing their job. House prices have run out of juice anyway.