Property Market Recovery May Start Here

Following the credit crunch and the interest rate increases over the last 16 months, the housing market has seen a significant slowdown. With Halifax revealing a 1.1 per cent house price fall for November on the back of smaller falls in September and October, the situation looked less than promising for the market. Not surprisingly, those involved in the housing industry have been calling for a rate cut, adding to the pressure applied by signs of a wider economic slowdown. In contrast, there have been concerns that factors such as rising fuel and food prices would make the inflationary risks too great to risk a cut. So tight was the decision facing the monetary policy committee (MPC) that economists predicting either outcome admitted they could not do so with any confidence. Global Insight's chief UK and European economist Howard Archer said: "We are going for no change, but we wouldn't be surprised if they do. It's right on the margin." One who was expecting the MPC to trim the rate, Ian Kernohan of Royal London Asset Management, said: "On balance, I'm still looking for a cut, but it's a very close call." It may turn out that the decision was made, as in January and June, by the closest possible margin of five to four, but the reasoning behind it was clear enough. In its statement announcing the cut, the MPC said that it believed the general slowdown in the economy would help keep inflation at bay, making a rate cut feasible. Such reasoning bears comparison with the longer-term analysis in the November inflation report that inflation could hit its targets even with interest rate cuts. That analysis had prompted predictions of two or three cuts in 2008. In the end, the same reasoning may have simply been brought forward. Naturally enough, the housing industry has been pleased by the news. The director general of the Council of Mortgage Lenders, Michael Coogan, said: "A reduction in interest rates is exactly what the market needs and will benefit consumers," while Peter Bolton-King, chief executive of the national Association of Estate Agents, said: "I'm hopeful this will be the turning point in consumer confidence that will set the market back on track again." The hope for the housing industry, from investors to first-time buyers, will be that this is indeed a watershed. Already banks are cutting their mortgage rates to reflect the change, with HSBC, Nationwide and Halifax promptly announcing such moves. With Scottish Widows Investment Partnership predicting that rates will go on being cut to reach five per cent by the middle of 2008, the housing market may soon be in much better shape. In today's world Property investment is an excellent investment option especially investment in UK