Outlook: Panto-time among mortgage lenders
Tuesday 30 December 1997
As in panto, we should all probably be highly suspicious of this traditional happy ending. The lenders are fed up with being portrayed as the villains behind a volatile market that in the past has exaggerated the ups and downs of the wider economy. They want to recast themselves as fairy godmothers presiding over an orderly housing market. Unanimity in the mortgage industry about prospects for a steady recovery, an end to boom and bust, is therefore a very predictable one.
They might well be right about next year. Past and future mortgage rate rises, declining consumer confidence and an increased supply of new homes coming on to the market should all contribute to a slower rate of house price inflation. At the same time, there is enough momentum in the recovery after the dark days of the early 1990s to keep the number of home sales and house prices at a healthy level.
But the underlying structure of the housing market has not changed. The supply of land and homes is relatively fixed, while long-run demographic changes mean demand is likely to continue to grow strongly. This adds up to increases in real house prices over the long term, with sharp fluctuations in the short term because demand can adjust much faster than supply over the course of a business cycle. The fact that inflation is lower than it used to be, or that some people still bear the scars of the late 1980s boom and subsequent bust, does not alter the analysis.
The only question is whether the shift to a low-inflation background will reduce the scale of the ups and downs in house price inflation. The answer depends crucially on the experience of the latest economic cycle, the first low-inflation recovery since the 1960s. In other words, it depends on what did happen to house prices last year. As any panto-goer would warn, you need to look behind you. Too bad Halifax and Nationwide can not agree what's there.
- 1 Pope Francis issues top 10 tips for happiness
- 2 Disney heiress Abigail disowns her share of family profits in West Bank company
- 3 The secret report that helps Israel hide facts
- 4 Now diplomacy has failed, boycotting Israel might be the only way we can protect the people of Gaza
- 5 Israel's propaganda machine is finally starting to misfire
Russell Brand accuses Sean Hannity of terrorism after aggressive Israel-Gaza debate
Pope Francis issues top 10 tips for happiness
Justin Bieber posts Instagram photo of a crying Orlando Bloom after Ibiza fight 'over Miranda Kerr'
Disney heiress Abigail disowns her share of family profits in West Bank company
Air Algerie AH5017 crash: Jet fell 30,000 feet in three minutes ‘due to violent storm’
The secret report that helps Israel hide facts
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
- < Previous
- Next >
iJobs Money & Business
£200 - £500 per day + competitive: Orgtel: I am currently working on a large p...
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...
Negotiable: Harrington Starr: Operations Engineer (Redhat, UNIX, Solaris, Data...