Bank of England grants homeowners a reprieve

Homeowners will be welcoming the reprieve granted by the Bank of England’s Monetary Policy Committee yesterday, when it opted to not to increase the base rate from 5.75%.

The MPC’s decision would have been influenced by house price inflation and although the latest data from the Halifax shows a 0.7% rise in house prices in July, this was the fourth consecutive month in which prices grew by less than 1%.

The increase for June stood at 0.4%, up from the May figure of 0.2% and the July rise takes the annual rate of increase to 11.2%, up from 10.7% in June.

The trend is backed by mortgage approval figures from the Bank of England and Royal Institution of Chartered Surveyors. Between April and June 2007 these fell by 8%.

At the same time the level of interest from first time buyers seeking a property declined in June, for the seventh successive month.

Capital Economics, the leading economic consultancy, takes the view that house price growth to be down at around 5% year-on-year by the end of 2007.

Economists are still predicting that interest rates will see 6% by the turn of the year because inflation in the manufacturing sector is running high and evidence of a slow down in consumer spending is far from conclusive.

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