Inflation rate decrease gives hope to homeowners

| August 15, 2007

The latest inflation figures will leave homeowners sighing with relief and strengthen hopes that mortgage costs have now peaked.

Government figures show inflation falling to 1.9% in July, its lowest level since March 2006, and down from 2.4% in June.

The fall, to below the Government’s target of 2%, could prevent the much anticipated base rate rise from 5.75%, to 6%, before the end of the year.

The news could mean that interest rates will peak at 5.75% and given the current turbulence in the finance markets, makes another base rate rise this year unlikely.

The Royal Institution of Chartered Surveyors’ (RICS) latest survey will also be of interest to homeowners, as it shows that in July, house prices increased for the 21st consecutive month.

However, the rate of increase remained well below the survey’s long running average of 21.6%, for the second consecutive month.

The July RICS survey also shows the strongest decline in first-time buyer enquiries since August 2004.

The report’s authors concludes that softening demand and supply is causing market conditions to weaken further, and a decline in buyer activity is reflecting fears that the market may have peaked.

According to the RICS, aspiring first-time-buyers are continuing to rent until the market trend becomes clearer.

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