Rate hold is sweet relief for UK homeowners

UK homeowners are breathing a sigh of relief after the Bank of England yesterday said it would freeze interest rates at 4.75 per cent.

The no-change outcome has been widely expected because of the poor state of Britain's manufacturing sector and a cooling housing market.

A rise from the Monetary Policy Committee would have meant the sixth rate rise since November from the Bank, in a bid to ease property prices and tighten consumer spending.

According to the Halifax index, house prices over September have risen by 1.4 per cent, after a 0.5 per cent fall in August.

Martin Ellis, Halifax chief economist, said the survey results should be treated cautiously.

"The 2.7 per cent rise in the third quarter was less than half the 6.1 per cent gain in the second quarter," he said, "providing further evidence that house price inflation is slowing."

Howard Archer, economist at Global Insight, said the rebound in September was "very surprising."

"The rise seems very much at odds with most of the other housing market data and survey evidence," he said.

Figures from the Council of Mortgage Lenders and the British Bankers Association reveal a sharp fall in the number of new mortgages.

Meanwhile, a survey by Nationwide shows confidence in the market fell in September as only 40 per cent said they expect they home to be worth more in six months, than they are now.

The decision currently dividing UK economists is whether the MPC will hike interest rates again in November or if they will leave them unchanged for the rest of 2004.

Ross Walker, UK economist with Royal Bank of Scotland said despite predictions it was too soon to say if the Bank of England has finished raising rates in the current cycle.

"We are very close to a peak but there may be one further quarter point rise to come, probably in the early part of next year," he said.

Simon Rubinsohn, economist at Gerrard, said he believed that the Bank was "certain to eschew the opportunity to raise rates any further, but is likely to take a similar stance at the November and December meetings."

 

8th October 2004

Related News

Latest News

                             

NEWSLETTER SIGN UP