Bank of England holding base rate
The decision by the Bank of England to hold rates at 5.5%, shows clearly that it is still not fully convinced that the slowdown in the housing market has gone far enough.
Analysts are more doubtful however warning that continuing instability in the credit markets is going to force the Bank to cut the base rate very soon in order to overt a full blown crisis for borrowers of loans and mortgages.
The decision by the Bank to hold base rates was expected by most experts and it is now the third time in a row that policy makers have decided not to change rates.
While the credit crunch is creating turmoil in the financial markets the Bank of England is still looking for more concrete evidence that the housing market is continuing to slow down and that the credit crunch that has so far mostly been felt by banks is going to spread into the rest of the market. Meanwhile one in four home loan holders are said to be ‘anxious’ about the current financial situation.
According to Halifax the annual rate of house price inflation fell in the recently to 10.7% down from 11.4% the month before. Halifax is predicting that there will be even further falls in the next couple of months as the strong growth figures from early 2007 start to drop off from the annual rate of growth.
The three month figures for house price inflation give a better picture of the underlying trend in the market. Between September and December house prices grew by only 0.2% down from 0.9% from the previous three months of the year and a 2.3% increase in the second quarter of 2007.