What Will Happen To House Prices? - No Surprise When The Gains Party Is Over

7th August 2023

If you want to read an economics blog that is more than often correct then try Notayesmanseconomics's Blog. Today 7 August 2023 some reflections about house prices may give you some pause.

It is time to look again at the central bankers favourite economic measure which of course is house prices.

Just one particular point, I mean, there was a lot of focus in May on mortgage costs. Those mortgage costs respond much more these days given the shift in maturity to two or three year interest rates than they do to the overnight rate and the bank rate.

That was from Bank of England Deputy Governor Ben Broadbent at the press conference on Thursday. Look what he had been doing in the 30 minutes he had after the interest-rate announcement.

at least ten seconds before we came up here we had a look at that reaction of the market curve and specifically of two year interest rates to today's decision.

Of course they might be worried about their own mortgage rates but the issue here is that they are confessing that they first check a major determinant of house prices. You might also wonder why if they are all over such matters they do not consider them worthy of being in the UK inflation measure as the CPI ignores them? Or why the Bank of England has not defended the RPI which does?

Read the full item HERE